Correlation Between Fras Le and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Fras Le 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 Fras Le and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Fras Le 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 Fras Le with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Sumitomo Mitsui.
Diversification Opportunities for Fras Le and Sumitomo Mitsui
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fras and Sumitomo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and Fras Le 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 Fras le SA 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 Financial has no effect on the direction of Fras Le i.e., Fras Le and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Fras Le and Sumitomo Mitsui
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.46 times less risky than Sumitomo Mitsui. The stock trades about -0.41 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 7,315 in Sumitomo Mitsui Financial on August 24, 2024 and sell it today you would earn a total of 677.00 from holding Sumitomo Mitsui Financial or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fras le SA vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Fras le SA |
| Sumitomo Mitsui Financial |
Fras Le and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Sumitomo Mitsui
The main advantage of trading using opposite Fras Le and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le 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.| Fras Le vs. Baidu Inc | Fras Le vs. Deutsche Bank Aktiengesellschaft | Fras Le vs. HSBC Holdings plc | Fras Le vs. The Bank of |
| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Clave Indices De | Sumitomo Mitsui vs. BTG Pactual Logstica |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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