Correlation Between Sumitomo Mitsui and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Advance Auto 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 Sumitomo Mitsui and Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Financial and Advance Auto Parts, you can compare the effects of market volatilities on Sumitomo Mitsui and Advance Auto 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 Sumitomo Mitsui with a short position of Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Advance Auto.
Diversification Opportunities for Sumitomo Mitsui and Advance Auto
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Advance is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and Sumitomo Mitsui 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 Sumitomo Mitsui Financial are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Advance Auto go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Advance Auto
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.76 times more return on investment than Advance Auto. However, Sumitomo Mitsui Financial is 1.31 times less risky than Advance Auto. It trades about 0.11 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.04 per unit of risk. If you would invest 3,520 in Sumitomo Mitsui Financial on September 14, 2024 and sell it today you would earn a total of 5,516 from holding Sumitomo Mitsui Financial or generate 156.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 76.61% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Advance Auto Parts
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Advance Auto Parts |
Sumitomo Mitsui and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Advance Auto
The main advantage of trading using opposite Sumitomo Mitsui and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Sumitomo Mitsui vs. Delta Air Lines | Sumitomo Mitsui vs. Broadcom | Sumitomo Mitsui vs. G2D Investments | Sumitomo Mitsui vs. salesforce inc |
| Advance Auto vs. Sumitomo Mitsui Financial | Advance Auto vs. Take Two Interactive Software | Advance Auto vs. Iron Mountain Incorporated | Advance Auto vs. GP Investments |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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