Correlation Between Sumitomo Mitsui and Makita
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Makita 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 Makita 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 Makita, you can compare the effects of market volatilities on Sumitomo Mitsui and Makita 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 Makita. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Makita.
Diversification Opportunities for Sumitomo Mitsui and Makita
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Makita is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Makita go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Makita
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 0.89 times more return on investment than Makita. However, Sumitomo Mitsui Construction is 1.12 times less risky than Makita. It trades about 0.15 of its potential returns per unit of risk. Makita is currently generating about -0.09 per unit of risk. If you would invest 228.00 in Sumitomo Mitsui Construction on September 2, 2024 and sell it today you would earn a total of 14.00 from holding Sumitomo Mitsui Construction or generate 6.14% 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. Makita
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Makita |
Sumitomo Mitsui and Makita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Makita
The main advantage of trading using opposite Sumitomo Mitsui and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Makita 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 Makita will offset losses from the drop in Makita'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 |
| Makita vs. MTI WIRELESS EDGE | Makita vs. Sumitomo Mitsui Construction | Makita vs. North American Construction | Makita 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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