Correlation Between Sumitomo Metal and Huntsman Exploration
Can any of the company-specific risk be diversified away by investing in both Sumitomo Metal and Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration, you can compare the effects of market volatilities on Sumitomo Metal and Huntsman Exploration 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 Huntsman Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Metal and Huntsman Exploration.
Diversification Opportunities for Sumitomo Metal and Huntsman Exploration
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Huntsman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Metal Mining and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration 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 Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Sumitomo Metal i.e., Sumitomo Metal and Huntsman Exploration go up and down completely randomly.
Pair Corralation between Sumitomo Metal and Huntsman Exploration
Assuming the 90 days horizon Sumitomo Metal Mining is expected to under-perform the Huntsman Exploration. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Metal Mining is 63.67 times less risky than Huntsman Exploration. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Huntsman Exploration is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Huntsman Exploration on August 30, 2024 and sell it today you would earn a total of 2.60 from holding Huntsman Exploration or generate 236.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Metal Mining vs. Huntsman Exploration
Performance |
| Timeline |
| Sumitomo Metal Mining |
| Huntsman Exploration |
Sumitomo Metal and Huntsman Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Metal and Huntsman Exploration
The main advantage of trading using opposite Sumitomo Metal and Huntsman Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Metal position performs unexpectedly, Huntsman Exploration 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 Huntsman Exploration will offset losses from the drop in Huntsman Exploration's long position.| Sumitomo Metal vs. Rockridge Resources | Sumitomo Metal vs. Ameriwest Lithium | Sumitomo Metal vs. Osisko Metals Incorporated | Sumitomo Metal vs. Volt Lithium Corp |
| Huntsman Exploration vs. Rockridge Resources | Huntsman Exploration vs. Ameriwest Lithium | Huntsman Exploration vs. Osisko Metals Incorporated | Huntsman Exploration vs. Volt Lithium Corp |
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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