Correlation Between Adidas AG and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Adidas AG and Sumitomo Chemical 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 Adidas AG and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between adidas AG and Sumitomo Chemical, you can compare the effects of market volatilities on Adidas AG and Sumitomo Chemical 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 Adidas AG with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Sumitomo Chemical.
Diversification Opportunities for Adidas AG and Sumitomo Chemical
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adidas and Sumitomo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Adidas AG 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 adidas AG are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Adidas AG i.e., Adidas AG and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Adidas AG and Sumitomo Chemical
Assuming the 90 days trading horizon adidas AG is expected to generate 1.36 times more return on investment than Sumitomo Chemical. However, Adidas AG is 1.36 times more volatile than Sumitomo Chemical. It trades about 0.05 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.24 per unit of risk. If you would invest 21,940 in adidas AG on September 1, 2024 and sell it today you would earn a total of 370.00 from holding adidas AG or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
adidas AG vs. Sumitomo Chemical
Performance |
| Timeline |
| adidas AG |
| Sumitomo Chemical |
Adidas AG and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adidas AG and Sumitomo Chemical
The main advantage of trading using opposite Adidas AG and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, Sumitomo Chemical 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 Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Adidas AG vs. Fidelity National Information | Adidas AG vs. Automatic Data Processing | Adidas AG vs. National Storage Affiliates | Adidas AG vs. Hyrican Informationssysteme Aktiengesellschaft |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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