Correlation Between Sumitomo Mitsui and Altair Engineering
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Altair Engineering 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 Altair Engineering 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 Altair Engineering, you can compare the effects of market volatilities on Sumitomo Mitsui and Altair Engineering 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 Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Altair Engineering.
Diversification Opportunities for Sumitomo Mitsui and Altair Engineering
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sumitomo and Altair is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering 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 Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Altair Engineering go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Altair Engineering
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 14.39 times less return on investment than Altair Engineering. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 1.01 times less risky than Altair Engineering. It trades about 0.01 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,300 in Altair Engineering on October 18, 2024 and sell it today you would earn a total of 2,400 from holding Altair Engineering or generate 28.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. Altair Engineering
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Altair Engineering |
Sumitomo Mitsui and Altair Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Altair Engineering
The main advantage of trading using opposite Sumitomo Mitsui and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Altair Engineering 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 Altair Engineering will offset losses from the drop in Altair Engineering's long position.| Sumitomo Mitsui vs. InPlay Oil Corp | Sumitomo Mitsui vs. Nippon Light Metal | Sumitomo Mitsui vs. ANTA SPORTS PRODUCT | Sumitomo Mitsui vs. JD SPORTS FASH |
| Altair Engineering vs. PLAYMATES TOYS | Altair Engineering vs. TRAVEL LEISURE DL 01 | Altair Engineering vs. COLUMBIA SPORTSWEAR | Altair Engineering vs. Sumitomo Mitsui Construction |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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