Correlation Between Sumitomo Rubber and Penn National
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Penn National 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 Penn National 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 Penn National Gaming, you can compare the effects of market volatilities on Sumitomo Rubber and Penn National 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 Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Penn National.
Diversification Opportunities for Sumitomo Rubber and Penn National
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Penn is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Penn National go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Penn National
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.73 times more return on investment than Penn National. However, Sumitomo Rubber Industries is 1.38 times less risky than Penn National. It trades about 0.36 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.25 per unit of risk. If you would invest 890.00 in Sumitomo Rubber Industries on September 5, 2024 and sell it today you would earn a total of 150.00 from holding Sumitomo Rubber Industries or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Penn National Gaming
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Penn National Gaming |
Sumitomo Rubber and Penn National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Penn National
The main advantage of trading using opposite Sumitomo Rubber and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Penn National 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 Penn National will offset losses from the drop in Penn National's long position.The idea behind Sumitomo Rubber Industries and Penn National Gaming pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Penn National vs. GOODYEAR T RUBBER | Penn National vs. VIRG NATL BANKSH | Penn National vs. National Bank Holdings | Penn National vs. Sumitomo Rubber Industries |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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