Correlation Between Sumitomo Chemical and NIIT

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

Diversification Opportunities for Sumitomo Chemical and NIIT

0.5

Correlation Coefficient

Sumitomo Chemical  NIIT

Very weak diversification

The 3 months correlation between Sumitomo and NIIT is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and NIIT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIIT Limited 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 NIIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIIT Limited has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and NIIT go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and NIIT

Assuming the 90 days trading horizon Sumitomo Chemical India is expected to generate 0.56 times more return on investment than NIIT. However, Sumitomo Chemical India is 1.78 times less risky than NIIT. It trades about 0.02 of its potential returns per unit of risk. NIIT Limited is currently generating about -0.17 per unit of risk. If you would invest  52,660  in Sumitomo Chemical India on December 26, 2024 and sell it today you would earn a total of  750.00  from holding Sumitomo Chemical India or generate 1.42% return on investment over 90 days.

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

Sumitomo Chemical India  vs.  NIIT Limited

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 1 (%) 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.

NIIT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIIT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sumitomo Chemical and NIIT

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

The idea behind Sumitomo Chemical India and NIIT Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.