Correlation Between Dow Jones and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Sumitomo, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sumitomo.
Diversification Opportunities for Dow Jones and Sumitomo
Excellent diversification
The 3 months correlation between Dow and Sumitomo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Sumitomo go up and down completely randomly.
Pair Corralation between Dow Jones and Sumitomo
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.33 times more return on investment than Sumitomo. However, Dow Jones Industrial is 3.05 times less risky than Sumitomo. It trades about 0.36 of its potential returns per unit of risk. Sumitomo is currently generating about 0.05 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sumitomo
Performance |
| Timeline |
Dow Jones and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sumitomo
Pair trading matchups for Sumitomo
Pair Trading with Dow Jones and Sumitomo
The main advantage of trading using opposite Dow Jones and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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