Correlation Between Sumitomo Chemical and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Principal Financial 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 Principal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and Principal Financial Group, you can compare the effects of market volatilities on Sumitomo Chemical and Principal Financial 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 Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Principal Financial.
Diversification Opportunities for Sumitomo Chemical and Principal Financial
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sumitomo and Principal is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Principal Financial go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Principal Financial
Assuming the 90 days horizon Sumitomo Chemical is expected to generate 1.09 times more return on investment than Principal Financial. However, Sumitomo Chemical is 1.09 times more volatile than Principal Financial Group. It trades about -0.25 of its potential returns per unit of risk. Principal Financial Group is currently generating about -0.38 per unit of risk. If you would invest 216.00 in Sumitomo Chemical on September 28, 2024 and sell it today you would lose (16.00) from holding Sumitomo Chemical or give up 7.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sumitomo Chemical vs. Principal Financial Group
Performance |
| Timeline |
| Sumitomo Chemical |
| Principal Financial |
Sumitomo Chemical and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Principal Financial
The main advantage of trading using opposite Sumitomo Chemical and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial's long position.| Sumitomo Chemical vs. Air Liquide SA | Sumitomo Chemical vs. AIR LIQUIDE ADR | Sumitomo Chemical vs. Shin Etsu Chemical Co | Sumitomo Chemical vs. Dow Inc |
| Principal Financial vs. Allianz SE | Principal Financial vs. ALLIANZ SE UNSPADR | Principal Financial vs. AXA SA | Principal Financial vs. ASSGENERALI ADR 12EO |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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