Correlation Between Sumitomo Mitsui and Natwest Group
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Natwest Group 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 Natwest Group 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 Natwest Group PLC, you can compare the effects of market volatilities on Sumitomo Mitsui and Natwest Group 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 Natwest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Natwest Group.
Diversification Opportunities for Sumitomo Mitsui and Natwest Group
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Natwest is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Natwest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natwest Group PLC 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 Natwest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natwest Group PLC has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Natwest Group go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Natwest Group
Given the investment horizon of 90 days Sumitomo Mitsui Financial is expected to generate 1.16 times more return on investment than Natwest Group. However, Sumitomo Mitsui is 1.16 times more volatile than Natwest Group PLC. It trades about 0.28 of its potential returns per unit of risk. Natwest Group PLC is currently generating about 0.13 per unit of risk. If you would invest 1,277 in Sumitomo Mitsui Financial on August 31, 2024 and sell it today you would earn a total of 141.00 from holding Sumitomo Mitsui Financial or generate 11.04% 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. Natwest Group PLC
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Natwest Group PLC |
Sumitomo Mitsui and Natwest Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Natwest Group
The main advantage of trading using opposite Sumitomo Mitsui and Natwest Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Natwest Group 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 Natwest Group will offset losses from the drop in Natwest Group'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 |
| Natwest Group vs. ING Group NV | Natwest Group vs. HSBC Holdings PLC | Natwest Group vs. Banco Santander SA | Natwest Group vs. UBS Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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