Correlation Between Royal Bank and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Sumitomo Mitsui 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 Royal Bank and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Royal Bank and Sumitomo Mitsui 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 Royal Bank with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Sumitomo Mitsui.
Diversification Opportunities for Royal Bank and Sumitomo Mitsui
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Royal and Sumitomo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and Royal Bank 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 Royal Bank of are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Royal Bank i.e., Royal Bank and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Royal Bank and Sumitomo Mitsui
Allowing for the 90-day total investment horizon Royal Bank is expected to generate 2.0 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Royal Bank of is 1.77 times less risky than Sumitomo Mitsui. It trades about 0.08 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 795.00 in Sumitomo Mitsui Financial on August 27, 2024 and sell it today you would earn a total of 632.00 from holding Sumitomo Mitsui Financial or generate 79.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Sumitomo Mitsui Financial
Performance |
| Timeline |
| Royal Bank |
| Sumitomo Mitsui Financial |
Royal Bank and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Sumitomo Mitsui
The main advantage of trading using opposite Royal Bank and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Sumitomo Mitsui 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 Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| Royal Bank vs. Toronto Dominion Bank | Royal Bank vs. Nu Holdings | Royal Bank vs. HSBC Holdings PLC | Royal Bank vs. Bank of Montreal |
| Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. HSBC Holdings PLC |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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