Correlation Between Sumitomo Mitsui and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and NXP Semiconductors 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 NXP Semiconductors 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 NXP Semiconductors NV, you can compare the effects of market volatilities on Sumitomo Mitsui and NXP Semiconductors 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 NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and NXP Semiconductors.
Diversification Opportunities for Sumitomo Mitsui and NXP Semiconductors
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sumitomo and NXP is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and NXP Semiconductors
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.96 times more return on investment than NXP Semiconductors. However, Sumitomo Mitsui Financial is 1.04 times less risky than NXP Semiconductors. It trades about 0.13 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.02 per unit of risk. If you would invest 8,232 in Sumitomo Mitsui Financial on September 27, 2024 and sell it today you would earn a total of 516.00 from holding Sumitomo Mitsui Financial or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. NXP Semiconductors NV
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| NXP Semiconductors |
Sumitomo Mitsui and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and NXP Semiconductors
The main advantage of trading using opposite Sumitomo Mitsui and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, NXP Semiconductors 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 NXP Semiconductors will offset losses from the drop in NXP Semiconductors' long position.| Sumitomo Mitsui vs. Tyson Foods | Sumitomo Mitsui vs. NXP Semiconductors NV | Sumitomo Mitsui vs. Zoom Video Communications | Sumitomo Mitsui vs. Ross Stores |
| NXP Semiconductors vs. Metalrgica Riosulense SA | NXP Semiconductors vs. Ameriprise Financial | NXP Semiconductors vs. Sumitomo Mitsui Financial | NXP Semiconductors vs. Southwest Airlines Co |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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