Correlation Between Sumitomo Chemical and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Sunstone Hotel 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 Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and Sunstone Hotel Investors, you can compare the effects of market volatilities on Sumitomo Chemical and Sunstone Hotel 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 Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Sunstone Hotel.
Diversification Opportunities for Sumitomo Chemical and Sunstone Hotel
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and Sunstone is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Sunstone Hotel go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Sunstone Hotel
Assuming the 90 days horizon Sumitomo Chemical is expected to under-perform the Sunstone Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical is 1.49 times less risky than Sunstone Hotel. The stock trades about -0.11 of its potential returns per unit of risk. The Sunstone Hotel Investors is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 950.00 in Sunstone Hotel Investors on August 29, 2024 and sell it today you would earn a total of 70.00 from holding Sunstone Hotel Investors or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical vs. Sunstone Hotel Investors
Performance |
| Timeline |
| Sumitomo Chemical |
| Sunstone Hotel Investors |
Sumitomo Chemical and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Sunstone Hotel
The main advantage of trading using opposite Sumitomo Chemical and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Sunstone Hotel 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel's long position.| Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech | Sumitomo Chemical vs. SIVERS SEMICONDUCTORS AB |
| Sunstone Hotel vs. ADRIATIC METALS LS 013355 | Sunstone Hotel vs. GALENA MINING LTD | Sunstone Hotel vs. Ross Stores | Sunstone Hotel vs. Perseus Mining Limited |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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