Correlation Between Basic Materials and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Sumitomo Mitsui.
Diversification Opportunities for Basic Materials and Sumitomo Mitsui
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Sumitomo is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials 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 Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Basic Materials and Sumitomo Mitsui
Assuming the 90 days trading horizon Basic Materials is expected to generate 163.06 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Basic Materials is 2.17 times less risky than Sumitomo Mitsui. It trades about 0.0 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,371 in Sumitomo Mitsui Financial on August 24, 2024 and sell it today you would earn a total of 4,621 from holding Sumitomo Mitsui Financial or generate 137.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.77% |
| Values | Daily Returns |
Basic Materials vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
Basic Materials and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Sumitomo Mitsui Financial
Pair trading matchups for Sumitomo Mitsui
Pair Trading with Basic Materials and Sumitomo Mitsui
The main advantage of trading using opposite Basic Materials and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Ross Stores | Basic Materials vs. Autohome | Basic Materials vs. Zoom Video Communications | Basic Materials vs. Metalrgica Riosulense SA |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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