Correlation Between Sumitomo Mitsui and Capital One
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Capital One 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 Capital One 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 Capital One Financial, you can compare the effects of market volatilities on Sumitomo Mitsui and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Capital One.
Diversification Opportunities for Sumitomo Mitsui and Capital One
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Capital is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Capital One go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Capital One
Assuming the 90 days trading horizon Sumitomo Mitsui is expected to generate 1.46 times less return on investment than Capital One. In addition to that, Sumitomo Mitsui is 1.14 times more volatile than Capital One Financial. It trades about 0.1 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.17 per unit of volatility. If you would invest 36,173 in Capital One Financial on August 25, 2024 and sell it today you would earn a total of 17,731 from holding Capital One Financial or generate 49.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.64% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Capital One Financial
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Capital One Financial |
Sumitomo Mitsui and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Capital One
The main advantage of trading using opposite Sumitomo Mitsui and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Clave Indices De | Sumitomo Mitsui vs. BTG Pactual Logstica | Sumitomo Mitsui vs. Telefonaktiebolaget LM Ericsson |
| Capital One vs. Bread Financial Holdings | Capital One vs. Fras le SA | Capital One vs. Clave Indices De | Capital One vs. BTG Pactual Logstica |
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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