Correlation Between Sumitomo Dainippon and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sumitomo Dainippon and Dow Jones 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 Sumitomo Dainippon and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Dainippon Pharma and Dow Jones Industrial, you can compare the effects of market volatilities on Sumitomo Dainippon and Dow Jones 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 Sumitomo Dainippon with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Dainippon and Dow Jones.
Diversification Opportunities for Sumitomo Dainippon and Dow Jones
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sumitomo and Dow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Dainippon Pharma and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Sumitomo Dainippon 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 Sumitomo Dainippon Pharma are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Sumitomo Dainippon i.e., Sumitomo Dainippon and Dow Jones go up and down completely randomly.
Pair Corralation between Sumitomo Dainippon and Dow Jones
Assuming the 90 days horizon Sumitomo Dainippon Pharma is expected to under-perform the Dow Jones. In addition to that, Sumitomo Dainippon is 5.1 times more volatile than Dow Jones Industrial. It trades about -0.65 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.43% |
| Values | Daily Returns |
Sumitomo Dainippon Pharma vs. Dow Jones Industrial
Performance |
| Timeline |
Sumitomo Dainippon and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sumitomo Dainippon Pharma
Pair trading matchups for Sumitomo Dainippon
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sumitomo Dainippon and Dow Jones
The main advantage of trading using opposite Sumitomo Dainippon and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Dainippon position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Sumitomo Dainippon vs. Hypera SA | Sumitomo Dainippon vs. YourWay Cannabis Brands | Sumitomo Dainippon vs. Cumberland Pharmaceuticals | Sumitomo Dainippon vs. Genomma Lab Internacional |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |