Correlation Between Sumitomo Electric and Dorman Products
Can any of the company-specific risk be diversified away by investing in both Sumitomo Electric and Dorman Products 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 Electric and Dorman Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Electric Industries and Dorman Products, you can compare the effects of market volatilities on Sumitomo Electric and Dorman Products 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 Electric with a short position of Dorman Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Electric and Dorman Products.
Diversification Opportunities for Sumitomo Electric and Dorman Products
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Dorman is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Electric Industries and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products and Sumitomo Electric 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 Electric Industries are associated (or correlated) with Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of Sumitomo Electric i.e., Sumitomo Electric and Dorman Products go up and down completely randomly.
Pair Corralation between Sumitomo Electric and Dorman Products
Assuming the 90 days horizon Sumitomo Electric is expected to generate 1.72 times less return on investment than Dorman Products. In addition to that, Sumitomo Electric is 1.08 times more volatile than Dorman Products. It trades about 0.11 of its total potential returns per unit of risk. Dorman Products is currently generating about 0.2 per unit of volatility. If you would invest 10,950 in Dorman Products on September 2, 2024 and sell it today you would earn a total of 3,048 from holding Dorman Products or generate 27.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Electric Industries vs. Dorman Products
Performance |
| Timeline |
| Sumitomo Electric |
| Dorman Products |
Sumitomo Electric and Dorman Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Electric and Dorman Products
The main advantage of trading using opposite Sumitomo Electric and Dorman Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Electric position performs unexpectedly, Dorman Products 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 Dorman Products will offset losses from the drop in Dorman Products' long position.| Sumitomo Electric vs. Allison Transmission Holdings | Sumitomo Electric vs. Luminar Technologies | Sumitomo Electric vs. Quantumscape Corp | Sumitomo Electric vs. Lear Corporation |
| Dorman Products vs. Standard Motor Products | Dorman Products vs. Motorcar Parts of | Dorman Products vs. Douglas Dynamics | Dorman Products vs. Stoneridge |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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