Correlation Between TIANDE CHEMICAL and Sumitomo Mitsui

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

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

Diversification Opportunities for TIANDE CHEMICAL and Sumitomo Mitsui

-0.09

Correlation Coefficient

TIANDE CHEMICAL  Sumitomo Mitsui

Good diversification

The 3 months correlation between TIANDE and Sumitomo is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding TIANDE CHEMICAL and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and TIANDE 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 TIANDE CHEMICAL are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of TIANDE CHEMICAL i.e., TIANDE CHEMICAL and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between TIANDE CHEMICAL and Sumitomo Mitsui

If you would invest  7.25  in TIANDE CHEMICAL on October 22, 2024 and sell it today you would earn a total of  0.00  from holding TIANDE CHEMICAL or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

TIANDE CHEMICAL  vs.  Sumitomo Mitsui Construction

TIANDE CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumitomo Mitsui Cons

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TIANDE CHEMICAL and Sumitomo Mitsui

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

The idea behind TIANDE CHEMICAL and Sumitomo Mitsui Construction 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.