Correlation Between Sanyo Chemical and Sumitomo Rubber

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

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

Diversification Opportunities for Sanyo Chemical and Sumitomo Rubber

0.33

Correlation Coefficient

Sanyo Chemical  Sumitomo Rubber

Weak diversification

The 3 months correlation between Sanyo and Sumitomo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sanyo Chemical Industries and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Sanyo 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 Sanyo Chemical Industries are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Sanyo Chemical i.e., Sanyo Chemical and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Sanyo Chemical and Sumitomo Rubber

Assuming the 90 days horizon Sanyo Chemical is expected to generate 11.27 times less return on investment than Sumitomo Rubber. But when comparing it to its historical volatility, Sanyo Chemical Industries is 1.12 times less risky than Sumitomo Rubber. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,070  in Sumitomo Rubber Industries on December 29, 2024 and sell it today you would earn a total of  130.00  from holding Sumitomo Rubber Industries or generate 12.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sanyo Chemical Industries  vs.  Sumitomo Rubber Industries

Sanyo Chemical Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sanyo Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Rubber Indu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sumitomo Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sanyo Chemical and Sumitomo Rubber

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

The idea behind Sanyo Chemical Industries and Sumitomo Rubber Industries 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 Stocks Directory module to find actively traded stocks across global markets.