Correlation Between Zuari Agro and Sumitomo Chemical

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

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

Diversification Opportunities for Zuari Agro and Sumitomo Chemical

0.54

Correlation Coefficient

Zuari Agro  Sumitomo Chemical

Very weak diversification

The 3 months correlation between Zuari and Sumitomo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Zuari Agro Chemicals and Sumitomo Chemical India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical India and Zuari Agro 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 Zuari Agro Chemicals are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical India has no effect on the direction of Zuari Agro i.e., Zuari Agro and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Zuari Agro and Sumitomo Chemical

Assuming the 90 days trading horizon Zuari Agro Chemicals is expected to under-perform the Sumitomo Chemical. In addition to that, Zuari Agro is 1.34 times more volatile than Sumitomo Chemical India. It trades about -0.09 of its total potential returns per unit of risk. Sumitomo Chemical India is currently generating about 0.02 per unit of volatility. If you would invest  52,660  in Sumitomo Chemical India on December 26, 2024 and sell it today you would earn a total of  750.00  from holding Sumitomo Chemical India or generate 1.42% return on investment over 90 days.

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

Zuari Agro Chemicals  vs.  Sumitomo Chemical India

Zuari Agro Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zuari Agro Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sumitomo Chemical India

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Sumitomo Chemical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zuari Agro and Sumitomo Chemical

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

The idea behind Zuari Agro Chemicals and Sumitomo Chemical India 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.