Correlation Between Chevron Corp and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Sumitomo 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 Chevron Corp and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Sumitomo, you can compare the effects of market volatilities on Chevron Corp and Sumitomo 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 Chevron Corp with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Sumitomo.
Diversification Opportunities for Chevron Corp and Sumitomo
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chevron and Sumitomo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and Chevron 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 Chevron Corp are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Chevron Corp i.e., Chevron Corp and Sumitomo go up and down completely randomly.
Pair Corralation between Chevron Corp and Sumitomo
Considering the 90-day investment horizon Chevron Corp is expected to generate 10.55 times less return on investment than Sumitomo. But when comparing it to its historical volatility, Chevron Corp is 2.9 times less risky than Sumitomo. It trades about 0.01 of its potential returns per unit of risk. Sumitomo is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,635 in Sumitomo on September 4, 2024 and sell it today you would earn a total of 538.00 from holding Sumitomo or generate 32.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 92.32% |
| Values | Daily Returns |
Chevron Corp vs. Sumitomo
Performance |
| Timeline |
| Chevron Corp |
| Sumitomo |
Chevron Corp and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Sumitomo
The main advantage of trading using opposite Chevron Corp and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Sumitomo 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 will offset losses from the drop in Sumitomo's long position.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. TotalEnergies SE ADR | Chevron Corp vs. Equinor ASA ADR |
| Sumitomo vs. Grupo Bimbo SAB | Sumitomo vs. Grupo Financiero Inbursa | Sumitomo vs. Becle SA de | Sumitomo vs. HUMANA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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