Correlation Between China BlueChemical and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both China BlueChemical and Sumitomo Chemical 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 China BlueChemical and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China BlueChemical and Sumitomo Chemical, you can compare the effects of market volatilities on China BlueChemical and Sumitomo Chemical 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 China BlueChemical with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China BlueChemical and Sumitomo Chemical.
Diversification Opportunities for China BlueChemical and Sumitomo Chemical
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Sumitomo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and China BlueChemical 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 China BlueChemical are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of China BlueChemical i.e., China BlueChemical and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between China BlueChemical and Sumitomo Chemical
Assuming the 90 days horizon China BlueChemical is expected to generate 1.23 times more return on investment than Sumitomo Chemical. However, China BlueChemical is 1.23 times more volatile than Sumitomo Chemical. It trades about 0.03 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about 0.01 per unit of risk. If you would invest 20.00 in China BlueChemical on August 27, 2024 and sell it today you would earn a total of 3.00 from holding China BlueChemical or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China BlueChemical vs. Sumitomo Chemical
Performance |
| Timeline |
| China BlueChemical |
| Sumitomo Chemical |
China BlueChemical and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China BlueChemical and Sumitomo Chemical
The main advantage of trading using opposite China BlueChemical and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical position performs unexpectedly, Sumitomo Chemical 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 Chemical will offset losses from the drop in Sumitomo Chemical's long position.| China BlueChemical vs. Superior Plus Corp | China BlueChemical vs. NMI Holdings | China BlueChemical vs. Origin Agritech | China BlueChemical vs. SIVERS SEMICONDUCTORS AB |
| Sumitomo Chemical vs. Sociedad Qumica y | Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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