Correlation Between Sumitomo Rubber and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on Sumitomo Rubber and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Automatic Data.
Diversification Opportunities for Sumitomo Rubber and Automatic Data
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Automatic is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Automatic Data go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Automatic Data
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to under-perform the Automatic Data. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Rubber Industries is 1.04 times less risky than Automatic Data. The stock trades about -0.04 of its potential returns per unit of risk. The Automatic Data Processing is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 28,365 in Automatic Data Processing on October 29, 2024 and sell it today you would earn a total of 10.00 from holding Automatic Data Processing or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Automatic Data Processing
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Automatic Data Processing |
Sumitomo Rubber and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Automatic Data
The main advantage of trading using opposite Sumitomo Rubber and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Sumitomo Rubber vs. DATAGROUP SE | Sumitomo Rubber vs. Electronic Arts | Sumitomo Rubber vs. ULTRA CLEAN HLDGS | Sumitomo Rubber vs. Datadog |
| Automatic Data vs. United Airlines Holdings | Automatic Data vs. COLUMBIA SPORTSWEAR | Automatic Data vs. PLAYTECH | Automatic Data vs. Aegean Airlines SA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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