Correlation Between E I and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both E I 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 E I and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E I du and Sumitomo Chemical Co, you can compare the effects of market volatilities on E I 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 E I with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of E I and Sumitomo Chemical.
Diversification Opportunities for E I and Sumitomo Chemical
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTA-PA and Sumitomo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding E I du and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and E I 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 E I du 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 E I i.e., E I and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between E I and Sumitomo Chemical
Assuming the 90 days trading horizon E I du is expected to generate 1.05 times more return on investment than Sumitomo Chemical. However, E I is 1.05 times more volatile than Sumitomo Chemical Co. It trades about -0.03 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.26 per unit of risk. If you would invest 5,845 in E I du on August 28, 2024 and sell it today you would lose (95.00) from holding E I du or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
E I du vs. Sumitomo Chemical Co
Performance |
| Timeline |
| E I du |
| Sumitomo Chemical |
E I and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E I and Sumitomo Chemical
The main advantage of trading using opposite E I and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E I 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.The idea behind E I du and Sumitomo Chemical Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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