Correlation Between NYSE Composite and Sumitomo
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Sumitomo 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 NYSE Composite and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Sumitomo, you can compare the effects of market volatilities on NYSE Composite and Sumitomo 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 NYSE Composite with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Sumitomo.
Diversification Opportunities for NYSE Composite and Sumitomo
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Sumitomo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and NYSE Composite 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 NYSE Composite are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of NYSE Composite i.e., NYSE Composite and Sumitomo go up and down completely randomly.
Pair Corralation between NYSE Composite and Sumitomo
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Sumitomo. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 4.87 times less risky than Sumitomo. The index trades about -0.07 of its potential returns per unit of risk. The Sumitomo is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,045 in Sumitomo on September 12, 2024 and sell it today you would earn a total of 155.00 from holding Sumitomo or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Sumitomo
Performance |
| Timeline |
NYSE Composite and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Sumitomo
Pair trading matchups for Sumitomo
Pair Trading with NYSE Composite and Sumitomo
The main advantage of trading using opposite NYSE Composite and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Sumitomo 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 will offset losses from the drop in Sumitomo's long position.| NYSE Composite vs. Teleflex Incorporated | NYSE Composite vs. Victorias Secret Co | NYSE Composite vs. Under Armour C | NYSE Composite vs. Steven Madden |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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