Correlation Between Sumitomo Mitsui and Suntory Beverage
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Suntory Beverage 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 Mitsui and Suntory Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Construction and Suntory Beverage Food, you can compare the effects of market volatilities on Sumitomo Mitsui and Suntory Beverage 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 Mitsui with a short position of Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Suntory Beverage.
Diversification Opportunities for Sumitomo Mitsui and Suntory Beverage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Suntory is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food and Sumitomo Mitsui 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 Mitsui Construction are associated (or correlated) with Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Suntory Beverage go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Suntory Beverage
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 0.81 times more return on investment than Suntory Beverage. However, Sumitomo Mitsui Construction is 1.24 times less risky than Suntory Beverage. It trades about 0.03 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.01 per unit of risk. If you would invest 230.00 in Sumitomo Mitsui Construction on September 3, 2024 and sell it today you would earn a total of 12.00 from holding Sumitomo Mitsui Construction or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. Suntory Beverage Food
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Suntory Beverage Food |
Sumitomo Mitsui and Suntory Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Suntory Beverage
The main advantage of trading using opposite Sumitomo Mitsui and Suntory Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Suntory Beverage 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 Suntory Beverage will offset losses from the drop in Suntory Beverage's long position.| Sumitomo Mitsui vs. Public Storage | Sumitomo Mitsui vs. TERADATA | Sumitomo Mitsui vs. Fidelity National Information | Sumitomo Mitsui vs. Darden Restaurants |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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