Correlation Between Sumitomo Rubber and Bank of China
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Bank of China 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 Bank of China 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 Bank of China, you can compare the effects of market volatilities on Sumitomo Rubber and Bank of China 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 Bank of China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Bank of China.
Diversification Opportunities for Sumitomo Rubber and Bank of China
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sumitomo and Bank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China 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 Bank of China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Bank of China go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Bank of China
Assuming the 90 days horizon Sumitomo Rubber is expected to generate 1.24 times less return on investment than Bank of China. But when comparing it to its historical volatility, Sumitomo Rubber Industries is 1.44 times less risky than Bank of China. It trades about 0.17 of its potential returns per unit of risk. Bank of China is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Bank of China on September 12, 2024 and sell it today you would earn a total of 3.00 from holding Bank of China or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Bank of China
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Bank of China |
Sumitomo Rubber and Bank of China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Bank of China
The main advantage of trading using opposite Sumitomo Rubber and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Bank of China 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 Bank of China will offset losses from the drop in Bank of China's long position.| Sumitomo Rubber vs. Superior Plus Corp | Sumitomo Rubber vs. NMI Holdings | Sumitomo Rubber vs. SIVERS SEMICONDUCTORS AB | Sumitomo Rubber vs. NorAm Drilling AS |
| Bank of China vs. Constellation Software | Bank of China vs. PSI Software AG | Bank of China vs. Lifeway Foods | Bank of China vs. Take Two Interactive Software |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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