Correlation Between Sumitomo Rubber and Nokian Renkaat
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Nokian Renkaat 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 Nokian Renkaat 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 Nokian Renkaat Oyj, you can compare the effects of market volatilities on Sumitomo Rubber and Nokian Renkaat 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 Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Nokian Renkaat.
Diversification Opportunities for Sumitomo Rubber and Nokian Renkaat
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and Nokian is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat Oyj 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 Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Nokian Renkaat go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Nokian Renkaat
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 3.18 times more return on investment than Nokian Renkaat. However, Sumitomo Rubber is 3.18 times more volatile than Nokian Renkaat Oyj. It trades about 0.06 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about 0.0 per unit of risk. If you would invest 352.00 in Sumitomo Rubber Industries on September 1, 2024 and sell it today you would earn a total of 658.00 from holding Sumitomo Rubber Industries or generate 186.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Nokian Renkaat Oyj
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Nokian Renkaat Oyj |
Sumitomo Rubber and Nokian Renkaat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Nokian Renkaat
The main advantage of trading using opposite Sumitomo Rubber and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Nokian Renkaat 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 Nokian Renkaat will offset losses from the drop in Nokian Renkaat's long position.| Sumitomo Rubber vs. SEKISUI CHEMICAL | Sumitomo Rubber vs. Sanyo Chemical Industries | Sumitomo Rubber vs. WESTLAKE CHEMICAL | Sumitomo Rubber vs. Lendlease Group |
| Nokian Renkaat vs. Bridgestone | Nokian Renkaat vs. The Goodyear Tire | Nokian Renkaat vs. Sumitomo Rubber Industries | Nokian Renkaat vs. Zeon Corporation |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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