Correlation Between Plastic Omnium and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both Plastic Omnium and Sumitomo Rubber 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 Plastic Omnium and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plastic Omnium and Sumitomo Rubber Industries, you can compare the effects of market volatilities on Plastic Omnium and Sumitomo Rubber 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 Plastic Omnium with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and Sumitomo Rubber.
Diversification Opportunities for Plastic Omnium and Sumitomo Rubber
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Plastic and Sumitomo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Plastic Omnium 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 Plastic Omnium are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Plastic Omnium i.e., Plastic Omnium and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between Plastic Omnium and Sumitomo Rubber
Assuming the 90 days trading horizon Plastic Omnium is expected to generate 2.55 times more return on investment than Sumitomo Rubber. However, Plastic Omnium is 2.55 times more volatile than Sumitomo Rubber Industries. It trades about 0.2 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about -0.04 per unit of risk. If you would invest 995.00 in Plastic Omnium on October 29, 2024 and sell it today you would earn a total of 107.00 from holding Plastic Omnium or generate 10.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plastic Omnium vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| Plastic Omnium |
| Sumitomo Rubber Indu |
Plastic Omnium and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plastic Omnium and Sumitomo Rubber
The main advantage of trading using opposite Plastic Omnium and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium position performs unexpectedly, Sumitomo Rubber 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 Rubber will offset losses from the drop in Sumitomo Rubber's long position.| Plastic Omnium vs. Lery Seafood Group | Plastic Omnium vs. PLANT VEDA FOODS | Plastic Omnium vs. BOSTON BEER A | Plastic Omnium vs. National Beverage Corp |
| Sumitomo Rubber vs. DATAGROUP SE | Sumitomo Rubber vs. Electronic Arts | Sumitomo Rubber vs. ULTRA CLEAN HLDGS | Sumitomo Rubber vs. Datadog |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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