Correlation Between APPLIED MATERIALS and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Sumitomo Rubber 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 APPLIED MATERIALS and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Sumitomo Rubber Industries, you can compare the effects of market volatilities on APPLIED MATERIALS and Sumitomo Rubber 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 APPLIED MATERIALS with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Sumitomo Rubber.
Diversification Opportunities for APPLIED MATERIALS and Sumitomo Rubber
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between APPLIED and Sumitomo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and APPLIED MATERIALS 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 APPLIED MATERIALS are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Sumitomo Rubber
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Sumitomo Rubber. In addition to that, APPLIED MATERIALS is 1.29 times more volatile than Sumitomo Rubber Industries. It trades about -0.06 of its total potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.33 per unit of volatility. If you would invest 905.00 in Sumitomo Rubber Industries on August 27, 2024 and sell it today you would earn a total of 135.00 from holding Sumitomo Rubber Industries or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| APPLIED MATERIALS |
| Sumitomo Rubber Indu |
APPLIED MATERIALS and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Sumitomo Rubber
The main advantage of trading using opposite APPLIED MATERIALS and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Sumitomo Rubber 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 Rubber will offset losses from the drop in Sumitomo Rubber's long position.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Microsoft |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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