Correlation Between Sumitomo Mitsui and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Gerdau SA 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 Gerdau SA 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 Gerdau SA, you can compare the effects of market volatilities on Sumitomo Mitsui and Gerdau SA 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 Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Gerdau SA.
Diversification Opportunities for Sumitomo Mitsui and Gerdau SA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Gerdau is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA 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 Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Gerdau SA go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Gerdau SA
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.69 times more return on investment than Gerdau SA. However, Sumitomo Mitsui Financial is 1.44 times less risky than Gerdau SA. It trades about 0.38 of its potential returns per unit of risk. Gerdau SA is currently generating about 0.23 per unit of risk. If you would invest 7,378 in Sumitomo Mitsui Financial on August 31, 2024 and sell it today you would earn a total of 1,034 from holding Sumitomo Mitsui Financial or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Gerdau SA
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Gerdau SA |
Sumitomo Mitsui and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Gerdau SA
The main advantage of trading using opposite Sumitomo Mitsui and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Gerdau SA 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 Gerdau SA will offset losses from the drop in Gerdau SA'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 |
| Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Usinas Siderrgicas de | Gerdau SA vs. Companhia Energtica de | Gerdau SA vs. Cosan SA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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