Correlation Between Relx PLC and Sumitomo Electric
Can any of the company-specific risk be diversified away by investing in both Relx PLC and Sumitomo Electric 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 Relx PLC and Sumitomo Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Relx PLC ADR and Sumitomo Electric Industries, you can compare the effects of market volatilities on Relx PLC and Sumitomo Electric 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 Relx PLC with a short position of Sumitomo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Sumitomo Electric.
Diversification Opportunities for Relx PLC and Sumitomo Electric
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Relx and Sumitomo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Sumitomo Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Electric and Relx PLC 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 Relx PLC ADR are associated (or correlated) with Sumitomo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Electric has no effect on the direction of Relx PLC i.e., Relx PLC and Sumitomo Electric go up and down completely randomly.
Pair Corralation between Relx PLC and Sumitomo Electric
Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.87 times more return on investment than Sumitomo Electric. However, Relx PLC ADR is 1.15 times less risky than Sumitomo Electric. It trades about 0.11 of its potential returns per unit of risk. Sumitomo Electric Industries is currently generating about 0.09 per unit of risk. If you would invest 2,783 in Relx PLC ADR on September 4, 2024 and sell it today you would earn a total of 1,950 from holding Relx PLC ADR or generate 70.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Relx PLC ADR vs. Sumitomo Electric Industries
Performance |
| Timeline |
| Relx PLC ADR |
| Sumitomo Electric |
Relx PLC and Sumitomo Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Relx PLC and Sumitomo Electric
The main advantage of trading using opposite Relx PLC and Sumitomo Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, Sumitomo Electric 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 Electric will offset losses from the drop in Sumitomo Electric's long position.The idea behind Relx PLC ADR and Sumitomo Electric Industries 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 Electric vs. OppFi Inc | Sumitomo Electric vs. Fortinet | Sumitomo Electric vs. Brera Holdings PLC | Sumitomo Electric vs. MetLife |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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