Correlation Between Sumitomo Chemical and UFLEX

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

Diversification Opportunities for Sumitomo Chemical and UFLEX

0.77

Correlation Coefficient

Sumitomo Chemical  UFLEX

Poor diversification

The 3 months correlation between Sumitomo and UFLEX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and UFLEX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFLEX 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 UFLEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFLEX Limited has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and UFLEX go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and UFLEX

Assuming the 90 days trading horizon Sumitomo Chemical India is expected to generate 0.98 times more return on investment than UFLEX. However, Sumitomo Chemical India is 1.02 times less risky than UFLEX. It trades about -0.12 of its potential returns per unit of risk. UFLEX Limited is currently generating about -0.15 per unit of risk. If you would invest  54,295  in Sumitomo Chemical India on December 1, 2024 and sell it today you would lose (8,235) from holding Sumitomo Chemical India or give up 15.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sumitomo Chemical India  vs.  UFLEX Limited

Sumitomo Chemical India

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's technical 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.

UFLEX Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days UFLEX 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sumitomo Chemical and UFLEX

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

The idea behind Sumitomo Chemical India and UFLEX 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.