Correlation Between Itron and Sumitomo Corp
Can any of the company-specific risk be diversified away by investing in both Itron and Sumitomo Corp 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 Itron and Sumitomo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itron Inc and Sumitomo Corp ADR, you can compare the effects of market volatilities on Itron and Sumitomo Corp 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 Itron with a short position of Sumitomo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itron and Sumitomo Corp.
Diversification Opportunities for Itron and Sumitomo Corp
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Itron and Sumitomo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Itron Inc and Sumitomo Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Corp ADR and Itron 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 Itron Inc are associated (or correlated) with Sumitomo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Corp ADR has no effect on the direction of Itron i.e., Itron and Sumitomo Corp go up and down completely randomly.
Pair Corralation between Itron and Sumitomo Corp
Given the investment horizon of 90 days Itron Inc is expected to generate 1.25 times more return on investment than Sumitomo Corp. However, Itron is 1.25 times more volatile than Sumitomo Corp ADR. It trades about 0.18 of its potential returns per unit of risk. Sumitomo Corp ADR is currently generating about 0.04 per unit of risk. If you would invest 11,176 in Itron Inc on September 1, 2024 and sell it today you would earn a total of 677.00 from holding Itron Inc or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itron Inc vs. Sumitomo Corp ADR
Performance |
| Timeline |
| Itron Inc |
| Sumitomo Corp ADR |
Itron and Sumitomo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itron and Sumitomo Corp
The main advantage of trading using opposite Itron and Sumitomo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itron position performs unexpectedly, Sumitomo Corp 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 Corp will offset losses from the drop in Sumitomo Corp's long position.The idea behind Itron Inc and Sumitomo Corp ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sumitomo Corp vs. Itochu Corp ADR | Sumitomo Corp vs. Mitsubishi Corp | Sumitomo Corp vs. ITOCHU | Sumitomo Corp vs. Marubeni Corp ADR |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |