Correlation Between Sumitomo and SUMITOMO P

Can any of the company-specific risk be diversified away by investing in both Sumitomo and SUMITOMO P 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 and SUMITOMO P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumitomo and SUMITOMO P SP, you can compare the effects of market volatilities on Sumitomo and SUMITOMO P 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 with a short position of SUMITOMO P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo and SUMITOMO P.

Diversification Opportunities for Sumitomo and SUMITOMO P

0.61

Correlation Coefficient

Sumitomo  SUMITOMO P

Poor diversification

The 3 months correlation between Sumitomo and SUMITOMO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP and Sumitomo 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 are associated (or correlated) with SUMITOMO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of Sumitomo i.e., Sumitomo and SUMITOMO P go up and down completely randomly.

Pair Corralation between Sumitomo and SUMITOMO P

Assuming the 90 days trading horizon Sumitomo is expected to generate 1.43 times more return on investment than SUMITOMO P. However, Sumitomo is 1.43 times more volatile than SUMITOMO P SP. It trades about 0.11 of its potential returns per unit of risk. SUMITOMO P SP is currently generating about 0.07 per unit of risk. If you would invest  1,957  in Sumitomo on September 19, 2024 and sell it today you would earn a total of  93.00  from holding Sumitomo or generate 4.75% return on investment over 90 days.

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

Sumitomo  vs.  SUMITOMO P SP

Sumitomo

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Sumitomo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SUMITOMO P SP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SUMITOMO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sumitomo and SUMITOMO P

The main advantage of trading using opposite Sumitomo and SUMITOMO P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo position performs unexpectedly, SUMITOMO P 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 P will offset losses from the drop in SUMITOMO P's long position.

The idea behind Sumitomo and SUMITOMO P SP 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.