Correlation Between Bread Financial and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Bread Financial and Sumitomo Mitsui 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 Bread Financial and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Bread Financial and Sumitomo Mitsui 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 Bread Financial with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Sumitomo Mitsui.
Diversification Opportunities for Bread Financial and Sumitomo Mitsui
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bread and Sumitomo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Bread Financial i.e., Bread Financial and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Bread Financial and Sumitomo Mitsui
Assuming the 90 days trading horizon Bread Financial is expected to generate 1.86 times less return on investment than Sumitomo Mitsui. In addition to that, Bread Financial is 1.12 times more volatile than Sumitomo Mitsui Financial. It trades about 0.05 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.11 per unit of volatility. If you would invest 4,314 in Sumitomo Mitsui Financial on November 19, 2024 and sell it today you would earn a total of 4,139 from holding Sumitomo Mitsui Financial or generate 95.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 53.03% |
| Values | Daily Returns |
Bread Financial Holdings vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Bread Financial Holdings |
| Sumitomo Mitsui Financial |
Bread Financial and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Sumitomo Mitsui
The main advantage of trading using opposite Bread Financial and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| Bread Financial vs. Costco Wholesale | Bread Financial vs. Electronic Arts | Bread Financial vs. Tyson Foods | Bread Financial vs. Automatic Data Processing |
| Sumitomo Mitsui vs. Spotify Technology SA | Sumitomo Mitsui vs. Paycom Software | Sumitomo Mitsui vs. Deutsche Bank Aktiengesellschaft | Sumitomo Mitsui vs. ICICI Bank Limited |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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