Correlation Between Aker ASA and Sumitomo Corp
Can any of the company-specific risk be diversified away by investing in both Aker ASA and Sumitomo Corp 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 Aker ASA and Sumitomo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker ASA and Sumitomo Corp ADR, you can compare the effects of market volatilities on Aker ASA and Sumitomo Corp 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 Aker ASA with a short position of Sumitomo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker ASA and Sumitomo Corp.
Diversification Opportunities for Aker ASA and Sumitomo Corp
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aker and Sumitomo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and Sumitomo Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Corp ADR and Aker ASA 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 Aker ASA are associated (or correlated) with Sumitomo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Corp ADR has no effect on the direction of Aker ASA i.e., Aker ASA and Sumitomo Corp go up and down completely randomly.
Pair Corralation between Aker ASA and Sumitomo Corp
Assuming the 90 days horizon Aker ASA is expected to generate 11.88 times more return on investment than Sumitomo Corp. However, Aker ASA is 11.88 times more volatile than Sumitomo Corp ADR. It trades about 0.06 of its potential returns per unit of risk. Sumitomo Corp ADR is currently generating about 0.04 per unit of risk. If you would invest 7,715 in Aker ASA on September 2, 2024 and sell it today you would lose (2,750) from holding Aker ASA or give up 35.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 69.15% |
| Values | Daily Returns |
Aker ASA vs. Sumitomo Corp ADR
Performance |
| Timeline |
| Aker ASA |
| Sumitomo Corp ADR |
Aker ASA and Sumitomo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker ASA and Sumitomo Corp
The main advantage of trading using opposite Aker ASA and Sumitomo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker ASA position performs unexpectedly, Sumitomo Corp 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 Corp will offset losses from the drop in Sumitomo Corp's long position.| Aker ASA vs. BCB Bancorp | Aker ASA vs. LithiumBank Resources Corp | Aker ASA vs. FiscalNote Holdings | Aker ASA vs. FactSet Research Systems |
| Sumitomo Corp vs. Itochu Corp ADR | Sumitomo Corp vs. Mitsubishi Corp | Sumitomo Corp vs. ITOCHU | Sumitomo Corp vs. Marubeni Corp ADR |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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