Correlation Between FAST RETAIL and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and Sumitomo Mitsui 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 FAST RETAIL and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAST RETAIL ADR and Sumitomo Mitsui Construction, you can compare the effects of market volatilities on FAST RETAIL and Sumitomo Mitsui 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 FAST RETAIL with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and Sumitomo Mitsui.
Diversification Opportunities for FAST RETAIL and Sumitomo Mitsui
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FAST and Sumitomo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and FAST RETAIL 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 FAST RETAIL ADR are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between FAST RETAIL and Sumitomo Mitsui
Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Sumitomo Mitsui. In addition to that, FAST RETAIL is 2.17 times more volatile than Sumitomo Mitsui Construction. It trades about -0.2 of its total potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about -0.14 per unit of volatility. If you would invest 248.00 in Sumitomo Mitsui Construction on October 19, 2024 and sell it today you would lose (6.00) from holding Sumitomo Mitsui Construction or give up 2.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
FAST RETAIL ADR vs. Sumitomo Mitsui Construction
Performance |
| Timeline |
| FAST RETAIL ADR |
| Sumitomo Mitsui Cons |
FAST RETAIL and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and Sumitomo Mitsui
The main advantage of trading using opposite FAST RETAIL and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, Sumitomo Mitsui 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 Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| FAST RETAIL vs. Zijin Mining Group | FAST RETAIL vs. EAGLE MATERIALS | FAST RETAIL vs. Forsys Metals Corp | FAST RETAIL vs. Jacquet Metal Service |
| Sumitomo Mitsui vs. CARSALESCOM | Sumitomo Mitsui vs. TRADEGATE | Sumitomo Mitsui vs. Corporate Office Properties | Sumitomo Mitsui vs. FAST RETAIL ADR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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