Correlation Between Sumitomo Mitsui and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Micron Technology 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 Micron Technology 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 Micron Technology, you can compare the effects of market volatilities on Sumitomo Mitsui and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Micron Technology.
Diversification Opportunities for Sumitomo Mitsui and Micron Technology
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sumitomo and Micron is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Micron Technology go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Micron Technology
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.86 times more return on investment than Micron Technology. However, Sumitomo Mitsui Financial is 1.16 times less risky than Micron Technology. It trades about 0.12 of its potential returns per unit of risk. Micron Technology is currently generating about 0.07 per unit of risk. If you would invest 4,162 in Sumitomo Mitsui Financial on August 27, 2024 and sell it today you would earn a total of 4,102 from holding Sumitomo Mitsui Financial or generate 98.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 68.53% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Micron Technology
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Micron Technology |
Sumitomo Mitsui and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Micron Technology
The main advantage of trading using opposite Sumitomo Mitsui and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology'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 |
| Micron Technology vs. Taiwan Semiconductor Manufacturing | Micron Technology vs. Broadcom | Micron Technology vs. NXP Semiconductors NV | Micron Technology vs. STMicroelectronics NV |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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