Correlation Between Sumitomo Osaka and Sumitomo

Can any of the company-specific risk be diversified away by investing in both Sumitomo Osaka and Sumitomo at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sumitomo Osaka and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumitomo Osaka Cement and Sumitomo, you can compare the effects of market volatilities on Sumitomo Osaka and Sumitomo and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sumitomo Osaka with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Osaka and Sumitomo.

Diversification Opportunities for Sumitomo Osaka and Sumitomo

0.68

Correlation Coefficient

Sumitomo Osaka  Sumitomo

Poor diversification

The 3 months correlation between Sumitomo and Sumitomo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Osaka Cement and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and Sumitomo Osaka is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sumitomo Osaka Cement are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Sumitomo Osaka i.e., Sumitomo Osaka and Sumitomo go up and down completely randomly.

Pair Corralation between Sumitomo Osaka and Sumitomo

Assuming the 90 days horizon Sumitomo Osaka Cement is expected to generate 0.61 times more return on investment than Sumitomo. However, Sumitomo Osaka Cement is 1.63 times less risky than Sumitomo. It trades about 0.18 of its potential returns per unit of risk. Sumitomo is currently generating about 0.06 per unit of risk. If you would invest  1,970  in Sumitomo Osaka Cement on December 24, 2024 and sell it today you would earn a total of  330.00  from holding Sumitomo Osaka Cement or generate 16.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sumitomo Osaka Cement  vs.  Sumitomo

Sumitomo Osaka Cement

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Osaka Cement are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Osaka reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Sumitomo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sumitomo Osaka and Sumitomo

The main advantage of trading using opposite Sumitomo Osaka and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Osaka position performs unexpectedly, Sumitomo can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sumitomo will offset losses from the drop in Sumitomo's long position.

The idea behind Sumitomo Osaka Cement and Sumitomo pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.