Correlation Between Sumitomo Chemical and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Ross Stores 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 Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and Ross Stores, you can compare the effects of market volatilities on Sumitomo Chemical and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Ross Stores.
Diversification Opportunities for Sumitomo Chemical and Ross Stores
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sumitomo and Ross is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Ross Stores go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Ross Stores
Assuming the 90 days horizon Sumitomo Chemical is expected to generate 1.8 times more return on investment than Ross Stores. However, Sumitomo Chemical is 1.8 times more volatile than Ross Stores. It trades about 0.03 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest 202.00 in Sumitomo Chemical on August 29, 2024 and sell it today you would earn a total of 18.00 from holding Sumitomo Chemical or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical vs. Ross Stores
Performance |
| Timeline |
| Sumitomo Chemical |
| Ross Stores |
Sumitomo Chemical and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Ross Stores
The main advantage of trading using opposite Sumitomo Chemical and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Sumitomo Chemical vs. Air Liquide SA | Sumitomo Chemical vs. AIR LIQUIDE ADR | Sumitomo Chemical vs. Air Products and | Sumitomo Chemical vs. Shin Etsu Chemical Co |
| Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc | Ross Stores vs. Superior Plus Corp | Ross Stores vs. SIVERS SEMICONDUCTORS AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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