Correlation Between Bridgestone Corp and Sumitomo Electric
Can any of the company-specific risk be diversified away by investing in both Bridgestone Corp and Sumitomo Electric 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 Bridgestone Corp and Sumitomo Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone Corp ADR and Sumitomo Electric Industries, you can compare the effects of market volatilities on Bridgestone Corp and Sumitomo Electric 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 Bridgestone Corp with a short position of Sumitomo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone Corp and Sumitomo Electric.
Diversification Opportunities for Bridgestone Corp and Sumitomo Electric
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bridgestone and Sumitomo is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone Corp ADR and Sumitomo Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Electric and Bridgestone 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 Bridgestone Corp ADR are associated (or correlated) with Sumitomo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Electric has no effect on the direction of Bridgestone Corp i.e., Bridgestone Corp and Sumitomo Electric go up and down completely randomly.
Pair Corralation between Bridgestone Corp and Sumitomo Electric
Assuming the 90 days horizon Bridgestone Corp ADR is expected to under-perform the Sumitomo Electric. In addition to that, Bridgestone Corp is 2.35 times more volatile than Sumitomo Electric Industries. It trades about -0.13 of its total potential returns per unit of risk. Sumitomo Electric Industries is currently generating about 0.13 per unit of volatility. If you would invest 1,505 in Sumitomo Electric Industries on August 29, 2024 and sell it today you would earn a total of 152.00 from holding Sumitomo Electric Industries or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone Corp ADR vs. Sumitomo Electric Industries
Performance |
| Timeline |
| Bridgestone Corp ADR |
| Sumitomo Electric |
Bridgestone Corp and Sumitomo Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone Corp and Sumitomo Electric
The main advantage of trading using opposite Bridgestone Corp and Sumitomo Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone Corp position performs unexpectedly, Sumitomo Electric 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 Electric will offset losses from the drop in Sumitomo Electric's long position.| Bridgestone Corp vs. Continental AG PK | Bridgestone Corp vs. Compagnie Generale des | Bridgestone Corp vs. Denso Corp ADR | Bridgestone Corp vs. Subaru Corp ADR |
| Sumitomo Electric vs. Analog Devices | Sumitomo Electric vs. Microchip Technology | Sumitomo Electric vs. IPG Photonics | Sumitomo Electric vs. Marti Technologies |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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