Correlation Between Sumitomo Chemical and Sukhjit Starch

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

Diversification Opportunities for Sumitomo Chemical and Sukhjit Starch

-0.02

Correlation Coefficient

Sumitomo Chemical  Sukhjit Starch

Good diversification

The 3 months correlation between Sumitomo and Sukhjit is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and Sukhjit Starch Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sukhjit Starch Chemicals 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 Sukhjit Starch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sukhjit Starch Chemicals has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Sukhjit Starch go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and Sukhjit Starch

Assuming the 90 days trading horizon Sumitomo Chemical India is expected to generate 0.94 times more return on investment than Sukhjit Starch. However, Sumitomo Chemical India is 1.07 times less risky than Sukhjit Starch. It trades about -0.01 of its potential returns per unit of risk. Sukhjit Starch Chemicals is currently generating about -0.04 per unit of risk. If you would invest  53,950  in Sumitomo Chemical India on October 9, 2024 and sell it today you would lose (1,545) from holding Sumitomo Chemical India or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Sumitomo Chemical India  vs.  Sukhjit Starch Chemicals

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sukhjit Starch Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sukhjit Starch Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sumitomo Chemical and Sukhjit Starch

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

The idea behind Sumitomo Chemical India and Sukhjit Starch Chemicals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.