Correlation Between Sumitomo Mitsui and AmTrust Financial
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and AmTrust Financial 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 AmTrust Financial 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 AmTrust Financial Services, you can compare the effects of market volatilities on Sumitomo Mitsui and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and AmTrust Financial.
Diversification Opportunities for Sumitomo Mitsui and AmTrust Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and AmTrust is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and AmTrust Financial go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and AmTrust Financial
Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 3.53 times more return on investment than AmTrust Financial. However, Sumitomo Mitsui is 3.53 times more volatile than AmTrust Financial Services. It trades about 0.13 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.21 per unit of risk. If you would invest 2,066 in Sumitomo Mitsui Financial on September 1, 2024 and sell it today you would earn a total of 244.00 from holding Sumitomo Mitsui Financial or generate 11.81% 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. AmTrust Financial Services
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| AmTrust Financial |
Sumitomo Mitsui and AmTrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and AmTrust Financial
The main advantage of trading using opposite Sumitomo Mitsui and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, AmTrust Financial 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 AmTrust Financial will offset losses from the drop in AmTrust Financial's long position.| Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. HSBC Holdings PLC | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. Citigroup |
| AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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