Correlation Between SAFETY MEDICAL and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both SAFETY MEDICAL and Sumitomo Chemical 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 SAFETY MEDICAL and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAFETY MEDICAL PROD and Sumitomo Chemical, you can compare the effects of market volatilities on SAFETY MEDICAL and Sumitomo Chemical 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 SAFETY MEDICAL with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and Sumitomo Chemical.
Diversification Opportunities for SAFETY MEDICAL and Sumitomo Chemical
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SAFETY and Sumitomo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between SAFETY MEDICAL and Sumitomo Chemical
Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the Sumitomo Chemical. In addition to that, SAFETY MEDICAL is 3.1 times more volatile than Sumitomo Chemical. It trades about -0.33 of its total potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.24 per unit of volatility. If you would invest 232.00 in Sumitomo Chemical on August 31, 2024 and sell it today you would lose (16.00) from holding Sumitomo Chemical or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAFETY MEDICAL PROD vs. Sumitomo Chemical
Performance |
| Timeline |
| SAFETY MEDICAL PROD |
| Sumitomo Chemical |
SAFETY MEDICAL and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SAFETY MEDICAL and Sumitomo Chemical
The main advantage of trading using opposite SAFETY MEDICAL and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAFETY MEDICAL position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| SAFETY MEDICAL vs. SIVERS SEMICONDUCTORS AB | SAFETY MEDICAL vs. Darden Restaurants | SAFETY MEDICAL vs. Reliance Steel Aluminum | SAFETY MEDICAL vs. Q2M Managementberatung AG |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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