Correlation Between Honda and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Honda 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 Honda and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honda Motor Co and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Honda 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 Honda with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Sumitomo Mitsui.
Diversification Opportunities for Honda and Sumitomo Mitsui
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Honda and Sumitomo is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co 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 Honda 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 Honda Motor Co 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 Honda i.e., Honda and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Honda and Sumitomo Mitsui
Assuming the 90 days trading horizon Honda Motor Co is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 1.25 times less risky than Sumitomo Mitsui. The stock trades about -0.03 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,535 in Sumitomo Mitsui Financial on August 26, 2024 and sell it today you would earn a total of 1,729 from holding Sumitomo Mitsui Financial or generate 26.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.64% |
| Values | Daily Returns |
Honda Motor Co vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Honda Motor |
| Sumitomo Mitsui Financial |
Honda and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Sumitomo Mitsui
The main advantage of trading using opposite Honda and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda 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.| Honda vs. Marcopolo SA | Honda vs. Randon SA Implementos | Honda vs. Fras le SA | Honda vs. Indstrias Romi SA |
| Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Clave Indices De | Sumitomo Mitsui vs. BTG Pactual Logstica | Sumitomo Mitsui vs. Telefonaktiebolaget LM Ericsson |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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