Correlation Between Sumitomo Rubber and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and L3Harris 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 L3Harris 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 L3Harris Technologies, you can compare the effects of market volatilities on Sumitomo Rubber and L3Harris 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 L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and L3Harris Technologies.
Diversification Opportunities for Sumitomo Rubber and L3Harris Technologies
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and L3Harris is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris 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 L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and L3Harris Technologies go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and L3Harris Technologies
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 1.29 times more return on investment than L3Harris Technologies. However, Sumitomo Rubber is 1.29 times more volatile than L3Harris Technologies. It trades about 0.14 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.39 per unit of risk. If you would invest 1,050 in Sumitomo Rubber Industries on October 9, 2024 and sell it today you would earn a total of 30.00 from holding Sumitomo Rubber Industries or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. L3Harris Technologies
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| L3Harris Technologies |
Sumitomo Rubber and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and L3Harris Technologies
The main advantage of trading using opposite Sumitomo Rubber and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, L3Harris 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 L3Harris Technologies will offset losses from the drop in L3Harris Technologies' long position.| Sumitomo Rubber vs. International Consolidated Airlines | Sumitomo Rubber vs. American Airlines Group | Sumitomo Rubber vs. Laureate Education | Sumitomo Rubber vs. G8 EDUCATION |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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