Correlation Between Secom Co and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Secom Co and Sumitomo 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 Secom Co and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Secom Co Ltd and Sumitomo Chemical Co, you can compare the effects of market volatilities on Secom Co and Sumitomo 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 Secom Co with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secom Co and Sumitomo Chemical.
Diversification Opportunities for Secom Co and Sumitomo Chemical
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Secom and Sumitomo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Secom Co 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 Secom Co Ltd are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Secom Co i.e., Secom Co and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Secom Co and Sumitomo Chemical
Assuming the 90 days horizon Secom Co Ltd is expected to generate 0.72 times more return on investment than Sumitomo Chemical. However, Secom Co Ltd is 1.4 times less risky than Sumitomo Chemical. It trades about -0.17 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.26 per unit of risk. If you would invest 879.00 in Secom Co Ltd on August 28, 2024 and sell it today you would lose (41.00) from holding Secom Co Ltd or give up 4.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Secom Co Ltd vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Secom Co |
| Sumitomo Chemical |
Secom Co and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Secom Co and Sumitomo Chemical
The main advantage of trading using opposite Secom Co and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secom Co position performs unexpectedly, Sumitomo 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Secom Co vs. Mitsubishi Estate Co | Secom Co vs. Sekisui House Ltd | Secom Co vs. Daiwa House Industry | Secom Co vs. MSAD Insurance Group |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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