Correlation Between Sumitomo Mitsui and Warner Music
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Sumitomo Mitsui and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Warner Music.
Diversification Opportunities for Sumitomo Mitsui and Warner Music
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and Warner is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Warner Music go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Warner Music
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 0.77 times more return on investment than Warner Music. However, Sumitomo Mitsui Construction is 1.29 times less risky than Warner Music. It trades about 0.03 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.01 per unit of risk. If you would invest 236.00 in Sumitomo Mitsui Construction on September 24, 2024 and sell it today you would earn a total of 12.00 from holding Sumitomo Mitsui Construction or generate 5.08% 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. Warner Music Group
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Warner Music Group |
Sumitomo Mitsui and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Warner Music
The main advantage of trading using opposite Sumitomo Mitsui and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Sumitomo Mitsui vs. Apple Inc | Sumitomo Mitsui vs. Apple Inc | Sumitomo Mitsui vs. Apple Inc | Sumitomo Mitsui vs. Apple Inc |
| Warner Music vs. The Walt Disney | Warner Music vs. The Walt Disney | Warner Music vs. Charter Communications | Warner Music vs. ViacomCBS |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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