Correlation Between Sumitomo Mitsui and Sterling Metals
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Sterling Metals 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 Sterling Metals 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 Sterling Metals Corp, you can compare the effects of market volatilities on Sumitomo Mitsui and Sterling Metals 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 Sterling Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Sterling Metals.
Diversification Opportunities for Sumitomo Mitsui and Sterling Metals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and Sterling is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Sterling Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Metals Corp 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 Sterling Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Metals Corp has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Sterling Metals go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Sterling Metals
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 6.56 times less return on investment than Sterling Metals. But when comparing it to its historical volatility, Sumitomo Mitsui Financial is 2.55 times less risky than Sterling Metals. It trades about 0.03 of its potential returns per unit of risk. Sterling Metals Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.97 in Sterling Metals Corp on October 26, 2024 and sell it today you would earn a total of 0.45 from holding Sterling Metals Corp or generate 15.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.5% |
| Values | Daily Returns |
Sumitomo Mitsui Financial vs. Sterling Metals Corp
Performance |
| Timeline |
| Sumitomo Mitsui Financial |
| Sterling Metals Corp |
Sumitomo Mitsui and Sterling Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Sterling Metals
The main advantage of trading using opposite Sumitomo Mitsui and Sterling Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Sterling Metals 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 Sterling Metals will offset losses from the drop in Sterling Metals' long position.| Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. HSBC Holdings PLC | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. Citigroup |
| Sterling Metals vs. Progressive Planet Solutions | Sterling Metals vs. Durango Resources | Sterling Metals vs. Avarone Metals | Sterling Metals vs. Mundoro Capital |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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