Correlation Between Sumitomo Mitsui and First Energy
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and First Energy 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 First Energy 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 First Energy Metals, you can compare the effects of market volatilities on Sumitomo Mitsui and First Energy 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 First Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and First Energy.
Diversification Opportunities for Sumitomo Mitsui and First Energy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and First is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and First Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Energy Metals 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 First Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Energy Metals has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and First Energy go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and First Energy
Given the investment horizon of 90 days Sumitomo Mitsui is expected to generate 14.35 times less return on investment than First Energy. But when comparing it to its historical volatility, Sumitomo Mitsui Financial is 8.6 times less risky than First Energy. It trades about 0.02 of its potential returns per unit of risk. First Energy Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3.90 in First Energy Metals on October 26, 2024 and sell it today you would lose (0.75) from holding First Energy Metals or give up 19.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. First Energy Metals
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| First Energy Metals |
Sumitomo Mitsui and First Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and First Energy
The main advantage of trading using opposite Sumitomo Mitsui and First Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, First Energy 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 First Energy will offset losses from the drop in First Energy's long position.| Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. HSBC Holdings PLC |
| First Energy vs. MCF Energy | First Energy vs. Hypercharge Networks Corp | First Energy vs. Traction Uranium Corp | First Energy vs. F3 Uranium Corp |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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