Correlation Between Sumitomo Rubber and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Sumitomo Rubber and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Summit Materials.
Diversification Opportunities for Sumitomo Rubber and Summit Materials
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Summit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Summit Materials go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Summit Materials
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.68 times more return on investment than Summit Materials. However, Sumitomo Rubber Industries is 1.48 times less risky than Summit Materials. It trades about 0.39 of its potential returns per unit of risk. Summit Materials is currently generating about 0.26 per unit of risk. If you would invest 905.00 in Sumitomo Rubber Industries on August 27, 2024 and sell it today you would earn a total of 155.00 from holding Sumitomo Rubber Industries or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Summit Materials
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Summit Materials |
Sumitomo Rubber and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Summit Materials
The main advantage of trading using opposite Sumitomo Rubber and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Sumitomo Rubber vs. WisdomTree Investments | Sumitomo Rubber vs. PSI Software AG | Sumitomo Rubber vs. VITEC SOFTWARE GROUP | Sumitomo Rubber vs. DIVERSIFIED ROYALTY |
| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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