Correlation Between Essentra Plc and Sumitomo Rubber
Can any of the company-specific risk be diversified away by investing in both Essentra Plc 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 Essentra Plc and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essentra plc and Sumitomo Rubber Industries, you can compare the effects of market volatilities on Essentra Plc 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 Essentra Plc with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essentra Plc and Sumitomo Rubber.
Diversification Opportunities for Essentra Plc and Sumitomo Rubber
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Essentra and Sumitomo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Essentra plc 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 Essentra Plc 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 Essentra plc 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 Essentra Plc i.e., Essentra Plc and Sumitomo Rubber go up and down completely randomly.
Pair Corralation between Essentra Plc and Sumitomo Rubber
Assuming the 90 days horizon Essentra plc is expected to under-perform the Sumitomo Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Essentra plc is 1.16 times less risky than Sumitomo Rubber. The stock trades about -0.07 of its potential returns per unit of risk. The Sumitomo Rubber Industries is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 905.00 in Sumitomo Rubber Industries on August 29, 2024 and sell it today you would earn a total of 135.00 from holding Sumitomo Rubber Industries or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Essentra plc vs. Sumitomo Rubber Industries
Performance |
| Timeline |
| Essentra plc |
| Sumitomo Rubber Indu |
Essentra Plc and Sumitomo Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essentra Plc and Sumitomo Rubber
The main advantage of trading using opposite Essentra Plc and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essentra Plc 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.| Essentra Plc vs. Sanyo Chemical Industries | Essentra Plc vs. GRIFFIN MINING LTD | Essentra Plc vs. IMPERIAL TOBACCO | Essentra Plc vs. Westlake Chemical |
| Sumitomo Rubber vs. TRAINLINE PLC LS | Sumitomo Rubber vs. Liberty Broadband | Sumitomo Rubber vs. Air Transport Services | Sumitomo Rubber vs. TSOGO SUN GAMING |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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