Correlation Between Sumitomo Metal and South32
Can any of the company-specific risk be diversified away by investing in both Sumitomo Metal and South32 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 South32 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 South32 Limited, you can compare the effects of market volatilities on Sumitomo Metal and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Metal and South32.
Diversification Opportunities for Sumitomo Metal and South32
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and South32 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Metal Mining and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Sumitomo Metal i.e., Sumitomo Metal and South32 go up and down completely randomly.
Pair Corralation between Sumitomo Metal and South32
Assuming the 90 days horizon Sumitomo Metal Mining is expected to generate 0.34 times more return on investment than South32. However, Sumitomo Metal Mining is 2.93 times less risky than South32. It trades about -0.12 of its potential returns per unit of risk. South32 Limited is currently generating about -0.06 per unit of risk. If you would invest 612.00 in Sumitomo Metal Mining on October 20, 2024 and sell it today you would lose (37.00) from holding Sumitomo Metal Mining or give up 6.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Metal Mining vs. South32 Limited
Performance |
| Timeline |
| Sumitomo Metal Mining |
| South32 Limited |
Sumitomo Metal and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Metal and South32
The main advantage of trading using opposite Sumitomo Metal and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Metal position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Sumitomo Metal vs. Boliden AB ADR | Sumitomo Metal vs. Anglo American PLC | Sumitomo Metal vs. Glencore PLC | Sumitomo Metal vs. Snow Lake Resources |
| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Global Correlations Find global opportunities by holding instruments from different markets |