Correlation Between Nitto Denko and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Nitto Denko and Sumitomo Chemical 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 Nitto Denko and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nitto Denko Corp and Sumitomo Chemical Co, you can compare the effects of market volatilities on Nitto Denko and Sumitomo Chemical 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 Nitto Denko with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nitto Denko and Sumitomo Chemical.
Diversification Opportunities for Nitto Denko and Sumitomo Chemical
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nitto and Sumitomo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nitto Denko Corp and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Nitto Denko 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 Nitto Denko Corp are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Nitto Denko i.e., Nitto Denko and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Nitto Denko and Sumitomo Chemical
Assuming the 90 days horizon Nitto Denko Corp is expected to generate 0.92 times more return on investment than Sumitomo Chemical. However, Nitto Denko Corp is 1.09 times less risky than Sumitomo Chemical. It trades about -0.14 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.28 per unit of risk. If you would invest 1,641 in Nitto Denko Corp on August 30, 2024 and sell it today you would lose (82.00) from holding Nitto Denko Corp or give up 5.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nitto Denko Corp vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Nitto Denko Corp |
| Sumitomo Chemical |
Nitto Denko and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nitto Denko and Sumitomo Chemical
The main advantage of trading using opposite Nitto Denko and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nitto Denko position performs unexpectedly, Sumitomo Chemical 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 Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Nitto Denko vs. Akzo Nobel NV | Nitto Denko vs. Avoca LLC | Nitto Denko vs. Arkema SA ADR | Nitto Denko vs. HUMANA INC |
| Sumitomo Chemical vs. E I du | Sumitomo Chemical vs. Shin Etsu Chemical Co | Sumitomo Chemical vs. E I du | Sumitomo Chemical vs. BASF SE NA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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