Correlation Between SUMITOMO and WT Offshore

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

By analyzing existing cross correlation between SUMITOMO MITSUI FINANCIAL and WT Offshore, you can compare the effects of market volatilities on SUMITOMO and WT Offshore 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 with a short position of WT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUMITOMO and WT Offshore.

Diversification Opportunities for SUMITOMO and WT Offshore

-0.15

Correlation Coefficient

SUMITOMO  WT Offshore

Good diversification

The 3 months correlation between SUMITOMO and WTI is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SUMITOMO MITSUI FINANCIAL and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore and SUMITOMO 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 MITSUI FINANCIAL are associated (or correlated) with WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of SUMITOMO i.e., SUMITOMO and WT Offshore go up and down completely randomly.

Pair Corralation between SUMITOMO and WT Offshore

Assuming the 90 days trading horizon SUMITOMO MITSUI FINANCIAL is expected to generate 0.17 times more return on investment than WT Offshore. However, SUMITOMO MITSUI FINANCIAL is 5.76 times less risky than WT Offshore. It trades about 0.02 of its potential returns per unit of risk. WT Offshore is currently generating about -0.01 per unit of risk. If you would invest  8,483  in SUMITOMO MITSUI FINANCIAL on December 30, 2024 and sell it today you would earn a total of  37.00  from holding SUMITOMO MITSUI FINANCIAL or generate 0.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

SUMITOMO MITSUI FINANCIAL  vs.  WT Offshore

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO MITSUI FINANCIAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

WT Offshore

Risk-Adjusted Performance

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, WT Offshore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SUMITOMO and WT Offshore

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

The idea behind SUMITOMO MITSUI FINANCIAL and WT Offshore 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.