Correlation Between Sumitomo Chemical and Fnac Darty
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Fnac Darty 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 Chemical and Fnac Darty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and Fnac Darty SA, you can compare the effects of market volatilities on Sumitomo Chemical and Fnac Darty 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 Chemical with a short position of Fnac Darty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Fnac Darty.
Diversification Opportunities for Sumitomo Chemical and Fnac Darty
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Fnac is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and Fnac Darty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fnac Darty SA and Sumitomo Chemical 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 Chemical are associated (or correlated) with Fnac Darty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fnac Darty SA has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Fnac Darty go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Fnac Darty
Assuming the 90 days horizon Sumitomo Chemical is expected to under-perform the Fnac Darty. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical is 2.71 times less risky than Fnac Darty. The stock trades about -0.15 of its potential returns per unit of risk. The Fnac Darty SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,615 in Fnac Darty SA on September 2, 2024 and sell it today you would earn a total of 20.00 from holding Fnac Darty SA or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical vs. Fnac Darty SA
Performance |
| Timeline |
| Sumitomo Chemical |
| Fnac Darty SA |
Sumitomo Chemical and Fnac Darty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Fnac Darty
The main advantage of trading using opposite Sumitomo Chemical and Fnac Darty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Fnac Darty 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 Fnac Darty will offset losses from the drop in Fnac Darty's long position.The idea behind Sumitomo Chemical and Fnac Darty SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fnac Darty vs. BYD ELECTRONIC | Fnac Darty vs. AEGEAN AIRLINES | Fnac Darty vs. Richardson Electronics | Fnac Darty vs. Nok Airlines PCL |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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