Correlation Between WT Offshore and SUMITOMO

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

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

Diversification Opportunities for WT Offshore and SUMITOMO

0.22

Correlation Coefficient

WT Offshore  SUMITOMO

Modest diversification

The 3 months correlation between WTI and SUMITOMO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding WT Offshore 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 WT Offshore 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 WT Offshore 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 WT Offshore i.e., WT Offshore and SUMITOMO go up and down completely randomly.

Pair Corralation between WT Offshore and SUMITOMO

Considering the 90-day investment horizon WT Offshore is expected to under-perform the SUMITOMO. In addition to that, WT Offshore is 5.83 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about -0.04 of its total potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about 0.03 per unit of volatility. If you would invest  8,473  in SUMITOMO MITSUI FINANCIAL on December 2, 2024 and sell it today you would earn a total of  47.00  from holding SUMITOMO MITSUI FINANCIAL or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

WT Offshore  vs.  SUMITOMO MITSUI FINANCIAL

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

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 somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WT Offshore and SUMITOMO

The main advantage of trading using opposite WT Offshore and SUMITOMO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Offshore 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 WT Offshore 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.