Correlation Between Iluka Resources and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both Iluka Resources and Sumitomo Metal 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 Iluka Resources and Sumitomo Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iluka Resources Ltd and Sumitomo Metal Mining, you can compare the effects of market volatilities on Iluka Resources and Sumitomo Metal 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 Iluka Resources with a short position of Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iluka Resources and Sumitomo Metal.
Diversification Opportunities for Iluka Resources and Sumitomo Metal
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Iluka and Sumitomo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Iluka Resources Ltd and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and Iluka Resources 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 Iluka Resources Ltd are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Iluka Resources i.e., Iluka Resources and Sumitomo Metal go up and down completely randomly.
Pair Corralation between Iluka Resources and Sumitomo Metal
Assuming the 90 days horizon Iluka Resources Ltd is expected to under-perform the Sumitomo Metal. In addition to that, Iluka Resources is 1.01 times more volatile than Sumitomo Metal Mining. It trades about -0.34 of its total potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.19 per unit of volatility. If you would invest 691.00 in Sumitomo Metal Mining on September 1, 2024 and sell it today you would lose (78.00) from holding Sumitomo Metal Mining or give up 11.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iluka Resources Ltd vs. Sumitomo Metal Mining
Performance |
| Timeline |
| Iluka Resources |
| Sumitomo Metal Mining |
Iluka Resources and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iluka Resources and Sumitomo Metal
The main advantage of trading using opposite Iluka Resources and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iluka Resources position performs unexpectedly, Sumitomo Metal 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 Metal will offset losses from the drop in Sumitomo Metal's long position.| Iluka Resources vs. ERAMET SA | Iluka Resources vs. Giyani Metals Corp | Iluka Resources vs. IGO Limited | Iluka Resources vs. Grid Metals Corp |
| Sumitomo Metal vs. Boliden AB ADR | Sumitomo Metal vs. Anglo American PLC | Sumitomo Metal vs. Glencore PLC | Sumitomo Metal vs. Snow Lake Resources |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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