Correlation Between Alcoa Corp and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Sumitomo 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 Alcoa Corp and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Sumitomo, you can compare the effects of market volatilities on Alcoa Corp and Sumitomo 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 Alcoa Corp with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Sumitomo.
Diversification Opportunities for Alcoa Corp and Sumitomo
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alcoa and Sumitomo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Sumitomo go up and down completely randomly.
Pair Corralation between Alcoa Corp and Sumitomo
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 7.67 times less return on investment than Sumitomo. But when comparing it to its historical volatility, Alcoa Corp is 1.15 times less risky than Sumitomo. It trades about 0.01 of its potential returns per unit of risk. Sumitomo is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,630 in Sumitomo on September 4, 2024 and sell it today you would earn a total of 543.00 from holding Sumitomo or generate 33.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 92.0% |
| Values | Daily Returns |
Alcoa Corp vs. Sumitomo
Performance |
| Timeline |
| Alcoa Corp |
| Sumitomo |
Alcoa Corp and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Sumitomo
The main advantage of trading using opposite Alcoa Corp and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Sumitomo 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 will offset losses from the drop in Sumitomo's long position.| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
| Sumitomo vs. Grupo Bimbo SAB | Sumitomo vs. Grupo Financiero Inbursa | Sumitomo vs. Becle SA de | Sumitomo vs. HUMANA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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