Correlation Between Sumitomo Chemical and Max Healthcare

Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Max Healthcare 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 Max Healthcare 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 Max Healthcare Institute, you can compare the effects of market volatilities on Sumitomo Chemical and Max Healthcare 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 Max Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Max Healthcare.

Diversification Opportunities for Sumitomo Chemical and Max Healthcare

0.74

Correlation Coefficient

Sumitomo Chemical  Max Healthcare

Poor diversification

The 3 months correlation between Sumitomo and Max is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and Max Healthcare Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Healthcare Institute 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 Max Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Healthcare Institute has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Max Healthcare go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and Max Healthcare

Assuming the 90 days trading horizon Sumitomo Chemical India is expected to generate 0.72 times more return on investment than Max Healthcare. However, Sumitomo Chemical India is 1.39 times less risky than Max Healthcare. It trades about 0.03 of its potential returns per unit of risk. Max Healthcare Institute is currently generating about 0.02 per unit of risk. If you would invest  51,880  in Sumitomo Chemical India on December 27, 2024 and sell it today you would earn a total of  1,155  from holding Sumitomo Chemical India or generate 2.23% return on investment over 90 days.

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

Sumitomo Chemical India  vs.  Max Healthcare Institute

Sumitomo Chemical India

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical India are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Max Healthcare Institute

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Max Healthcare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sumitomo Chemical and Max Healthcare

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

The idea behind Sumitomo Chemical India and Max Healthcare Institute 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.