Correlation Between Marubeni Corp and Sumitomo Corp
Can any of the company-specific risk be diversified away by investing in both Marubeni Corp 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 Marubeni Corp and Sumitomo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marubeni Corp ADR and Sumitomo Corp ADR, you can compare the effects of market volatilities on Marubeni Corp 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 Marubeni Corp with a short position of Sumitomo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marubeni Corp and Sumitomo Corp.
Diversification Opportunities for Marubeni Corp and Sumitomo Corp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Marubeni and Sumitomo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni Corp ADR 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 Marubeni Corp 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 Marubeni Corp ADR 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 Marubeni Corp i.e., Marubeni Corp and Sumitomo Corp go up and down completely randomly.
Pair Corralation between Marubeni Corp and Sumitomo Corp
Assuming the 90 days horizon Marubeni Corp is expected to generate 1.25 times less return on investment than Sumitomo Corp. In addition to that, Marubeni Corp is 1.16 times more volatile than Sumitomo Corp ADR. It trades about 0.02 of its total potential returns per unit of risk. Sumitomo Corp ADR is currently generating about 0.03 per unit of volatility. If you would invest 1,849 in Sumitomo Corp ADR on August 29, 2024 and sell it today you would earn a total of 275.00 from holding Sumitomo Corp ADR or generate 14.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marubeni Corp ADR vs. Sumitomo Corp ADR
Performance |
| Timeline |
| Marubeni Corp ADR |
| Sumitomo Corp ADR |
Marubeni Corp and Sumitomo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marubeni Corp and Sumitomo Corp
The main advantage of trading using opposite Marubeni Corp and Sumitomo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marubeni Corp 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.| Marubeni Corp vs. Mitsubishi Corp | Marubeni Corp vs. Itochu Corp ADR | Marubeni Corp vs. Marubeni | Marubeni Corp vs. Sumitomo Corp ADR |
| 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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