Correlation Between Sumitomo Chemical and Sanyo Chemical
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Sanyo Chemical 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 Sanyo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical and Sanyo Chemical Industries, you can compare the effects of market volatilities on Sumitomo Chemical and Sanyo Chemical 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 Sanyo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Sanyo Chemical.
Diversification Opportunities for Sumitomo Chemical and Sanyo Chemical
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Sanyo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Sanyo Chemical go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Sanyo Chemical
Assuming the 90 days horizon Sumitomo Chemical is expected to under-perform the Sanyo Chemical. In addition to that, Sumitomo Chemical is 1.72 times more volatile than Sanyo Chemical Industries. It trades about -0.23 of its total potential returns per unit of risk. Sanyo Chemical Industries is currently generating about -0.14 per unit of volatility. If you would invest 2,440 in Sanyo Chemical Industries on August 25, 2024 and sell it today you would lose (60.00) from holding Sanyo Chemical Industries or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical vs. Sanyo Chemical Industries
Performance |
| Timeline |
| Sumitomo Chemical |
| Sanyo Chemical Industries |
Sumitomo Chemical and Sanyo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Sanyo Chemical
The main advantage of trading using opposite Sumitomo Chemical and Sanyo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Sanyo Chemical 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 Sanyo Chemical will offset losses from the drop in Sanyo Chemical's long position.| Sumitomo Chemical vs. Sociedad Qumica y | Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech |
| Sanyo Chemical vs. Zoom Video Communications | Sanyo Chemical vs. Salesforce | Sanyo Chemical vs. PTT Global Chemical | Sanyo Chemical vs. Eastman Chemical |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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