Correlation Between Sumitomo Mitsui and Movida Participaes

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Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Movida Participaes 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 Movida Participaes 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 Movida Participaes SA, you can compare the effects of market volatilities on Sumitomo Mitsui and Movida Participaes 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 Movida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Movida Participaes.

Diversification Opportunities for Sumitomo Mitsui and Movida Participaes

SumitomoMovidaDiversified AwaySumitomoMovidaDiversified Away100%
-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sumitomo and Movida is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Movida Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Movida Participaes 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 Movida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Movida Participaes has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Movida Participaes go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Movida Participaes

Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.79 times more return on investment than Movida Participaes. However, Sumitomo Mitsui Financial is 1.27 times less risky than Movida Participaes. It trades about 0.11 of its potential returns per unit of risk. Movida Participaes SA is currently generating about -0.02 per unit of risk. If you would invest  4,369  in Sumitomo Mitsui Financial on November 26, 2024 and sell it today you would earn a total of  4,379  from holding Sumitomo Mitsui Financial or generate 100.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy49.8%
ValuesDaily Returns

Sumitomo Mitsui Financial  vs.  Movida Participaes SA

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -40-30-20-10010
JavaScript chart by amCharts 3.21.15S1MF34 MOVI3
       Timeline  
Sumitomo Mitsui Financial 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb848688909294
Movida Participaes 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Movida Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.544.555.566.5

Sumitomo Mitsui and Movida Participaes Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.54-4.9-3.26-1.620.01.653.355.056.768.46 0.020.030.040.050.060.070.080.09
JavaScript chart by amCharts 3.21.15S1MF34 MOVI3
       Returns  

Pair Trading with Sumitomo Mitsui and Movida Participaes

The main advantage of trading using opposite Sumitomo Mitsui and Movida Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Movida Participaes 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 Movida Participaes will offset losses from the drop in Movida Participaes' long position.
The idea behind Sumitomo Mitsui Financial and Movida Participaes SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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