Correlation Between Rockridge Resources and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both Rockridge Resources and Sumitomo Metal 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 Rockridge Resources and Sumitomo Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockridge Resources and Sumitomo Metal Mining, you can compare the effects of market volatilities on Rockridge Resources and Sumitomo Metal 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 Rockridge Resources with a short position of Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockridge Resources and Sumitomo Metal.
Diversification Opportunities for Rockridge Resources and Sumitomo Metal
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Rockridge and Sumitomo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Rockridge Resources and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and Rockridge Resources 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 Rockridge Resources are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Rockridge Resources i.e., Rockridge Resources and Sumitomo Metal go up and down completely randomly.
Pair Corralation between Rockridge Resources and Sumitomo Metal
Assuming the 90 days horizon Rockridge Resources is expected to generate 3.94 times more return on investment than Sumitomo Metal. However, Rockridge Resources is 3.94 times more volatile than Sumitomo Metal Mining. It trades about 0.04 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.08 per unit of risk. If you would invest 1.18 in Rockridge Resources on September 1, 2024 and sell it today you would lose (0.08) from holding Rockridge Resources or give up 6.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Rockridge Resources vs. Sumitomo Metal Mining
Performance |
| Timeline |
| Rockridge Resources |
| Sumitomo Metal Mining |
Rockridge Resources and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rockridge Resources and Sumitomo Metal
The main advantage of trading using opposite Rockridge Resources and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockridge Resources position performs unexpectedly, Sumitomo Metal 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 Metal will offset losses from the drop in Sumitomo Metal's long position.| Rockridge Resources vs. ATT Inc | Rockridge Resources vs. Merck Company | Rockridge Resources vs. Walt Disney | Rockridge Resources vs. Caterpillar |
| Sumitomo Metal vs. Boliden AB ADR | Sumitomo Metal vs. Anglo American PLC | Sumitomo Metal vs. Glencore PLC | Sumitomo Metal vs. Snow Lake Resources |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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