Correlation Between Sumitomo Mitsui and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on Sumitomo Mitsui and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Chongqing Machinery.
Diversification Opportunities for Sumitomo Mitsui and Chongqing Machinery
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sumitomo and Chongqing is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Chongqing Machinery
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 27.75 times less return on investment than Chongqing Machinery. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 4.09 times less risky than Chongqing Machinery. It trades about 0.01 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.37 in Chongqing Machinery Electric on September 1, 2024 and sell it today you would earn a total of 4.98 from holding Chongqing Machinery Electric or generate 210.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. Chongqing Machinery Electric
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Chongqing Machinery |
Sumitomo Mitsui and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Chongqing Machinery
The main advantage of trading using opposite Sumitomo Mitsui and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Sumitomo Mitsui vs. SIVERS SEMICONDUCTORS AB | Sumitomo Mitsui vs. Darden Restaurants | Sumitomo Mitsui vs. Reliance Steel Aluminum | Sumitomo Mitsui vs. Q2M Managementberatung AG |
| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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