Correlation Between Sumitomo Chemical and TRAINLINE PLC
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and TRAINLINE PLC 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 TRAINLINE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and TRAINLINE PLC LS, you can compare the effects of market volatilities on Sumitomo Chemical and TRAINLINE PLC 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 TRAINLINE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and TRAINLINE PLC.
Diversification Opportunities for Sumitomo Chemical and TRAINLINE PLC
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sumitomo and TRAINLINE is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and TRAINLINE PLC go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and TRAINLINE PLC
Assuming the 90 days horizon Sumitomo Chemical is expected to under-perform the TRAINLINE PLC. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical is 2.54 times less risky than TRAINLINE PLC. The stock trades about -0.16 of its potential returns per unit of risk. The TRAINLINE PLC LS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 398.00 in TRAINLINE PLC LS on August 29, 2024 and sell it today you would earn a total of 84.00 from holding TRAINLINE PLC LS or generate 21.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical vs. TRAINLINE PLC LS
Performance |
| Timeline |
| Sumitomo Chemical |
| TRAINLINE PLC LS |
Sumitomo Chemical and TRAINLINE PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and TRAINLINE PLC
The main advantage of trading using opposite Sumitomo Chemical and TRAINLINE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, TRAINLINE PLC 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 TRAINLINE PLC will offset losses from the drop in TRAINLINE PLC's long position.| Sumitomo Chemical vs. Air Liquide SA | Sumitomo Chemical vs. Air Products and | Sumitomo Chemical vs. Shin Etsu Chemical Co | Sumitomo Chemical vs. BASF SE |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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