Correlation Between Sumitomo Mitsui and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Wells Fargo 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 Wells Fargo 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 Wells Fargo, you can compare the effects of market volatilities on Sumitomo Mitsui and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Wells Fargo.
Diversification Opportunities for Sumitomo Mitsui and Wells Fargo
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and Wells is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Wells Fargo go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Wells Fargo
Given the investment horizon of 90 days Sumitomo Mitsui Financial is expected to generate 1.79 times more return on investment than Wells Fargo. However, Sumitomo Mitsui is 1.79 times more volatile than Wells Fargo. It trades about 0.29 of its potential returns per unit of risk. Wells Fargo is currently generating about -0.07 per unit of risk. If you would invest 1,272 in Sumitomo Mitsui Financial on August 30, 2024 and sell it today you would earn a total of 146.00 from holding Sumitomo Mitsui Financial or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Wells Fargo
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Wells Fargo |
Sumitomo Mitsui and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Wells Fargo
The main advantage of trading using opposite Sumitomo Mitsui and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo'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 |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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