Correlation Between SUMITOMO P and Adidas AG
Can any of the company-specific risk be diversified away by investing in both SUMITOMO P and Adidas AG 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 P and Adidas AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SUMITOMO P SP and adidas AG, you can compare the effects of market volatilities on SUMITOMO P and Adidas AG 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 P with a short position of Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUMITOMO P and Adidas AG.
Diversification Opportunities for SUMITOMO P and Adidas AG
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SUMITOMO and Adidas is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SUMITOMO P SP and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and SUMITOMO P 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 P SP are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of SUMITOMO P i.e., SUMITOMO P and Adidas AG go up and down completely randomly.
Pair Corralation between SUMITOMO P and Adidas AG
Assuming the 90 days trading horizon SUMITOMO P is expected to generate 8.33 times less return on investment than Adidas AG. But when comparing it to its historical volatility, SUMITOMO P SP is 1.26 times less risky than Adidas AG. It trades about 0.01 of its potential returns per unit of risk. adidas AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,900 in adidas AG on September 25, 2024 and sell it today you would earn a total of 800.00 from holding adidas AG or generate 7.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
SUMITOMO P SP vs. adidas AG
Performance |
Timeline |
SUMITOMO P SP |
adidas AG |
SUMITOMO P and Adidas AG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SUMITOMO P and Adidas AG
The main advantage of trading using opposite SUMITOMO P and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUMITOMO P position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.SUMITOMO P vs. Honeywell International | SUMITOMO P vs. Mitsubishi | SUMITOMO P vs. ITOCHU | SUMITOMO P vs. CITIC Limited |
Check out your portfolio center.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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |