Correlation Between Hua Hong and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both Hua Hong and Sumitomo Rubber 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 Hua Hong and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Hong Semiconductor and Sumitomo Rubber Industries, you can compare the effects of market volatilities on Hua Hong and Sumitomo Rubber 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 Hua Hong with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Sumitomo Rubber.
Diversification Opportunities for Hua Hong and Sumitomo Rubber
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hua and Sumitomo is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Hua Hong i.e., Hua Hong and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between Hua Hong and Sumitomo Rubber
Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 2.65 times more return on investment than Sumitomo Rubber. However, Hua Hong is 2.65 times more volatile than Sumitomo Rubber Industries. It trades about 0.12 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.09 per unit of risk. If you would invest 177.00 in Hua Hong Semiconductor on October 18, 2024 and sell it today you would earn a total of 91.00 from holding Hua Hong Semiconductor or generate 51.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Hong Semiconductor vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| Hua Hong Semiconductor |
| Sumitomo Rubber Indu |
Hua Hong and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Hong and Sumitomo Rubber
The main advantage of trading using opposite Hua Hong and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong position performs unexpectedly, Sumitomo Rubber 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 Sumitomo Rubber will offset losses from the drop in Sumitomo Rubber's long position.| Hua Hong vs. YATRA ONLINE DL 0001 | Hua Hong vs. AOI Electronics Co | Hua Hong vs. SIEM OFFSHORE NEW | Hua Hong vs. ELECTRONIC ARTS |
| Sumitomo Rubber vs. China BlueChemical | Sumitomo Rubber vs. Tower Semiconductor | Sumitomo Rubber vs. MagnaChip Semiconductor Corp | Sumitomo Rubber vs. Hua Hong Semiconductor |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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