Correlation Between 90331HPL1 and SUMITOMO

Can any of the company-specific risk be diversified away by investing in both 90331HPL1 and SUMITOMO 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 90331HPL1 and SUMITOMO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US BANK NATIONAL and SUMITOMO MITSUI FINANCIAL, you can compare the effects of market volatilities on 90331HPL1 and SUMITOMO 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 90331HPL1 with a short position of SUMITOMO. Check out your portfolio center. Please also check ongoing floating volatility patterns of 90331HPL1 and SUMITOMO.

Diversification Opportunities for 90331HPL1 and SUMITOMO

0.46

Correlation Coefficient

90331HPL1  SUMITOMO

Very weak diversification

The 3 months correlation between 90331HPL1 and SUMITOMO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding US BANK NATIONAL and SUMITOMO MITSUI FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO MITSUI FINANCIAL and 90331HPL1 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 US BANK NATIONAL are associated (or correlated) with SUMITOMO. 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 FINANCIAL has no effect on the direction of 90331HPL1 i.e., 90331HPL1 and SUMITOMO go up and down completely randomly.

Pair Corralation between 90331HPL1 and SUMITOMO

Assuming the 90 days trading horizon US BANK NATIONAL is expected to generate 149.97 times more return on investment than SUMITOMO. However, 90331HPL1 is 149.97 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about 0.09 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.02 per unit of risk. If you would invest  9,520  in US BANK NATIONAL on September 3, 2024 and sell it today you would earn a total of  233.00  from holding US BANK NATIONAL or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.55%
Values	Daily Returns

US BANK NATIONAL  vs.  SUMITOMO MITSUI FINANCIAL

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SUMITOMO MITSUI FINANCIAL investors.

Pair Trading with 90331HPL1 and SUMITOMO

The main advantage of trading using opposite 90331HPL1 and SUMITOMO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 90331HPL1 position performs unexpectedly, SUMITOMO 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 will offset losses from the drop in SUMITOMO's long position.

The idea behind US BANK NATIONAL and SUMITOMO MITSUI FINANCIAL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.