Correlation Between Sumitomo Rubber and SOFI TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and SOFI TECHNOLOGIES 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 Rubber and SOFI TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Rubber Industries and SOFI TECHNOLOGIES, you can compare the effects of market volatilities on Sumitomo Rubber and SOFI TECHNOLOGIES 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 Rubber with a short position of SOFI TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and SOFI TECHNOLOGIES.
Diversification Opportunities for Sumitomo Rubber and SOFI TECHNOLOGIES
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and SOFI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and Sumitomo Rubber 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 Rubber Industries are associated (or correlated) with SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and SOFI TECHNOLOGIES go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and SOFI TECHNOLOGIES
Assuming the 90 days horizon Sumitomo Rubber is expected to generate 5.32 times less return on investment than SOFI TECHNOLOGIES. But when comparing it to its historical volatility, Sumitomo Rubber Industries is 1.63 times less risky than SOFI TECHNOLOGIES. It trades about 0.1 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 719.00 in SOFI TECHNOLOGIES on September 2, 2024 and sell it today you would earn a total of 845.00 from holding SOFI TECHNOLOGIES or generate 117.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. SOFI TECHNOLOGIES
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| SOFI TECHNOLOGIES |
Sumitomo Rubber and SOFI TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and SOFI TECHNOLOGIES
The main advantage of trading using opposite Sumitomo Rubber and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES will offset losses from the drop in SOFI TECHNOLOGIES's long position.| Sumitomo Rubber vs. Bridgestone | Sumitomo Rubber vs. The Goodyear Tire | Sumitomo Rubber vs. Zeon Corporation |
| SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc |
Check out your portfolio center.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.
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