Correlation Between Sumitomo Metal and American Helium

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Can any of the company-specific risk be diversified away by investing in both Sumitomo Metal and American Helium 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 Metal and American Helium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Metal Mining and American Helium, you can compare the effects of market volatilities on Sumitomo Metal and American Helium 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 Metal with a short position of American Helium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Metal and American Helium.

Diversification Opportunities for Sumitomo Metal and American Helium

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sumitomo and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Metal Mining and American Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Helium and Sumitomo Metal 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 Metal Mining are associated (or correlated) with American Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Helium has no effect on the direction of Sumitomo Metal i.e., Sumitomo Metal and American Helium go up and down completely randomly.

Pair Corralation between Sumitomo Metal and American Helium

Assuming the 90 days horizon Sumitomo Metal Mining is expected to under-perform the American Helium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Metal Mining is 21.8 times less risky than American Helium. The pink sheet trades about -0.02 of its potential returns per unit of risk. The American Helium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  21.00  in American Helium on August 30, 2024 and sell it today you would lose (10.00) from holding American Helium or give up 47.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sumitomo Metal Mining  vs.  American Helium

 Performance 
       Timeline  
Sumitomo Metal Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sumitomo Metal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
American Helium 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Metal and American Helium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sumitomo Metal and American Helium

The main advantage of trading using opposite Sumitomo Metal and American Helium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Metal position performs unexpectedly, American Helium 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 American Helium will offset losses from the drop in American Helium's long position.
The idea behind Sumitomo Metal Mining and American Helium pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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