Correlation Between Sumitomo Mitsui and Sony
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Sony 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 Sony 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 Sony Group, you can compare the effects of market volatilities on Sumitomo Mitsui and Sony 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 Sony. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Sony.
Diversification Opportunities for Sumitomo Mitsui and Sony
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Sony is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony Group 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 Sony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Group has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Sony go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Sony
Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.86 times more return on investment than Sony. However, Sumitomo Mitsui Financial is 1.17 times less risky than Sony. It trades about 0.25 of its potential returns per unit of risk. Sony Group is currently generating about 0.13 per unit of risk. If you would invest 6,937 in Sumitomo Mitsui Financial on August 30, 2024 and sell it today you would earn a total of 1,375 from holding Sumitomo Mitsui Financial or generate 19.82% 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. Sony Group
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Sony Group |
Sumitomo Mitsui and Sony Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Sony
The main advantage of trading using opposite Sumitomo Mitsui and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Sony 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 Sony will offset losses from the drop in Sony's long position.| Sumitomo Mitsui vs. Taiwan Semiconductor Manufacturing | Sumitomo Mitsui vs. G2D Investments | Sumitomo Mitsui vs. Tyson Foods | Sumitomo Mitsui vs. United Rentals |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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