Correlation Between Sumitomo Chemical and Krebs Biochemicals

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

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

Diversification Opportunities for Sumitomo Chemical and Krebs Biochemicals

0.03

Correlation Coefficient

Sumitomo Chemical  Krebs Biochemicals

Significant diversification

The 3 months correlation between Sumitomo and Krebs is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and Krebs Biochemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krebs Biochemicals and and Sumitomo Chemical 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 Chemical India are associated (or correlated) with Krebs Biochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krebs Biochemicals and has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Krebs Biochemicals go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and Krebs Biochemicals

Assuming the 90 days trading horizon Sumitomo Chemical India is expected to under-perform the Krebs Biochemicals. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical India is 4.22 times less risky than Krebs Biochemicals. The stock trades about -0.17 of its potential returns per unit of risk. The Krebs Biochemicals and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,779  in Krebs Biochemicals and on September 24, 2024 and sell it today you would lose (43.00) from holding Krebs Biochemicals and or give up 0.44% of portfolio value over 90 days.

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

Sumitomo Chemical India  vs.  Krebs Biochemicals and

Sumitomo Chemical India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Chemical India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Sumitomo Chemical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Krebs Biochemicals and

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krebs Biochemicals and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Krebs Biochemicals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Chemical and Krebs Biochemicals

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

The idea behind Sumitomo Chemical India and Krebs Biochemicals and 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.