Correlation Between Sumitomo Mitsui and Honda
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Honda 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 Honda 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 Honda Motor Co, you can compare the effects of market volatilities on Sumitomo Mitsui and Honda 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 Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Honda.
Diversification Opportunities for Sumitomo Mitsui and Honda
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sumitomo and Honda is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor 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 Honda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Motor has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Honda go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Honda
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.7 times more return on investment than Honda. However, Sumitomo Mitsui Financial is 1.43 times less risky than Honda. It trades about 0.37 of its potential returns per unit of risk. Honda Motor Co is currently generating about -0.31 per unit of risk. If you would invest 7,315 in Sumitomo Mitsui Financial on August 30, 2024 and sell it today you would earn a total of 997.00 from holding Sumitomo Mitsui Financial or generate 13.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Honda Motor Co
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Honda Motor |
Sumitomo Mitsui and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Honda
The main advantage of trading using opposite Sumitomo Mitsui and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Honda 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 Honda will offset losses from the drop in Honda's long position.| Sumitomo Mitsui vs. Taiwan Semiconductor Manufacturing | Sumitomo Mitsui vs. G2D Investments | Sumitomo Mitsui vs. Tyson Foods | Sumitomo Mitsui vs. United Rentals |
| Honda vs. GP Investments | Honda vs. Align Technology | Honda vs. Apartment Investment and | Honda vs. HDFC Bank Limited |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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