Correlation Between Sumitomo Mitsui and HEMISPHERE EGY
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and HEMISPHERE EGY 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 HEMISPHERE EGY 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 HEMISPHERE EGY, you can compare the effects of market volatilities on Sumitomo Mitsui and HEMISPHERE EGY 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 HEMISPHERE EGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and HEMISPHERE EGY.
Diversification Opportunities for Sumitomo Mitsui and HEMISPHERE EGY
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sumitomo and HEMISPHERE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and HEMISPHERE EGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEMISPHERE EGY 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 HEMISPHERE EGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEMISPHERE EGY has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and HEMISPHERE EGY go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and HEMISPHERE EGY
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 2.2 times less return on investment than HEMISPHERE EGY. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 1.13 times less risky than HEMISPHERE EGY. It trades about 0.06 of its potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 100.00 in HEMISPHERE EGY on September 12, 2024 and sell it today you would earn a total of 24.00 from holding HEMISPHERE EGY or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. HEMISPHERE EGY
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| HEMISPHERE EGY |
Sumitomo Mitsui and HEMISPHERE EGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and HEMISPHERE EGY
The main advantage of trading using opposite Sumitomo Mitsui and HEMISPHERE EGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, HEMISPHERE EGY 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 HEMISPHERE EGY will offset losses from the drop in HEMISPHERE EGY's long position.| Sumitomo Mitsui vs. GUARDANT HEALTH CL | Sumitomo Mitsui vs. STMICROELECTRONICS | Sumitomo Mitsui vs. Methode Electronics | Sumitomo Mitsui vs. ELECTRONIC ARTS |
| HEMISPHERE EGY vs. Apple Inc | HEMISPHERE EGY vs. Apple Inc | HEMISPHERE EGY vs. Apple Inc | HEMISPHERE EGY vs. Apple Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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