Correlation Between Sumitomo Mitsui and GSK Plc
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and GSK Plc 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 GSK Plc 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 GSK plc, you can compare the effects of market volatilities on Sumitomo Mitsui and GSK Plc 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 GSK Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and GSK Plc.
Diversification Opportunities for Sumitomo Mitsui and GSK Plc
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and GSK is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc 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 GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and GSK Plc go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and GSK Plc
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 1.09 times more return on investment than GSK Plc. However, Sumitomo Mitsui is 1.09 times more volatile than GSK plc. It trades about 0.08 of its potential returns per unit of risk. GSK plc is currently generating about -0.04 per unit of risk. If you would invest 6,887 in Sumitomo Mitsui Financial on September 1, 2024 and sell it today you would earn a total of 1,525 from holding Sumitomo Mitsui Financial or generate 22.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.66% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. GSK plc
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| GSK plc |
Sumitomo Mitsui and GSK Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and GSK Plc
The main advantage of trading using opposite Sumitomo Mitsui and GSK Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, GSK Plc 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 GSK Plc will offset losses from the drop in GSK Plc's long position.| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Fras le SA | Sumitomo Mitsui vs. Western Digital | Sumitomo Mitsui vs. Energisa SA |
| GSK Plc vs. Energisa SA | GSK Plc vs. BTG Pactual Logstica | GSK Plc vs. Plano Plano Desenvolvimento | GSK Plc vs. Companhia Habitasul de |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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