Correlation Between Sumitomo Mitsui and InterContinental
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and InterContinental 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 InterContinental 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 InterContinental Hotels Group, you can compare the effects of market volatilities on Sumitomo Mitsui and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and InterContinental.
Diversification Opportunities for Sumitomo Mitsui and InterContinental
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and InterContinental is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and InterContinental go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and InterContinental
Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 3.54 times more return on investment than InterContinental. However, Sumitomo Mitsui is 3.54 times more volatile than InterContinental Hotels Group. It trades about 0.04 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about -0.05 per unit of risk. If you would invest 2,288 in Sumitomo Mitsui Financial on October 20, 2024 and sell it today you would earn a total of 40.00 from holding Sumitomo Mitsui Financial or generate 1.75% 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. InterContinental Hotels Group
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| InterContinental Hotels |
Sumitomo Mitsui and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and InterContinental
The main advantage of trading using opposite Sumitomo Mitsui and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental'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 |
| InterContinental vs. Hyatt Hotels | InterContinental vs. Choice Hotels International | InterContinental vs. Hilton Worldwide Holdings | InterContinental vs. Wyndham Hotels Resorts |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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