Correlation Between Sumitomo Mitsui and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and DiamondRock Hospitality 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 DiamondRock Hospitality 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 DiamondRock Hospitality, you can compare the effects of market volatilities on Sumitomo Mitsui and DiamondRock Hospitality 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 DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and DiamondRock Hospitality.
Diversification Opportunities for Sumitomo Mitsui and DiamondRock Hospitality
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sumitomo and DiamondRock is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality 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 DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and DiamondRock Hospitality
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 1.39 times more return on investment than DiamondRock Hospitality. However, Sumitomo Mitsui is 1.39 times more volatile than DiamondRock Hospitality. It trades about 0.21 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.06 per unit of risk. If you would invest 228.00 in Sumitomo Mitsui Construction on September 23, 2024 and sell it today you would earn a total of 20.00 from holding Sumitomo Mitsui Construction or generate 8.77% 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. DiamondRock Hospitality
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| DiamondRock Hospitality |
Sumitomo Mitsui and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and DiamondRock Hospitality
The main advantage of trading using opposite Sumitomo Mitsui and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.| Sumitomo Mitsui vs. APPLIED MATERIALS | Sumitomo Mitsui vs. Cogent Communications Holdings | Sumitomo Mitsui vs. Mobilezone Holding AG | Sumitomo Mitsui vs. Highlight Communications AG |
| DiamondRock Hospitality vs. EBRO FOODS | DiamondRock Hospitality vs. alstria office REIT AG | DiamondRock Hospitality vs. Thai Beverage Public | DiamondRock Hospitality vs. CENTURIA OFFICE REIT |
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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