Correlation Between Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha 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 Knorr Bremse Aktiengesellschaft, you can compare the effects of market volatilities on Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha.
Diversification Opportunities for Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and Knorr-Bremse is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Knorr Bremse Aktiengesellschaf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knorr-Bremse Aktiengesellscha has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha
Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 3.06 times more return on investment than Knorr-Bremse Aktiengesellscha. However, Sumitomo Mitsui is 3.06 times more volatile than Knorr Bremse Aktiengesellschaft. It trades about 0.08 of its potential returns per unit of risk. Knorr Bremse Aktiengesellschaft is currently generating about -0.14 per unit of risk. If you would invest 2,190 in Sumitomo Mitsui Financial on September 2, 2024 and sell it today you would earn a total of 120.00 from holding Sumitomo Mitsui Financial or generate 5.48% 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. Knorr Bremse Aktiengesellschaf
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Knorr-Bremse Aktiengesellscha |
Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha
The main advantage of trading using opposite Sumitomo Mitsui and Knorr-Bremse Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Knorr-Bremse Aktiengesellscha 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 Knorr-Bremse Aktiengesellscha will offset losses from the drop in Knorr-Bremse Aktiengesellscha'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 |
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