Correlation Between Sumitomo Chemical and Altech Batteries
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Altech Batteries 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 Chemical and Altech Batteries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical Co and Altech Batteries Limited, you can compare the effects of market volatilities on Sumitomo Chemical and Altech Batteries 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 Chemical with a short position of Altech Batteries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Altech Batteries.
Diversification Opportunities for Sumitomo Chemical and Altech Batteries
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Altech is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Altech Batteries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altech Batteries and Sumitomo Chemical 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 Chemical Co are associated (or correlated) with Altech Batteries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altech Batteries has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Altech Batteries go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Altech Batteries
Assuming the 90 days horizon Sumitomo Chemical Co is expected to generate 0.3 times more return on investment than Altech Batteries. However, Sumitomo Chemical Co is 3.36 times less risky than Altech Batteries. It trades about -0.03 of its potential returns per unit of risk. Altech Batteries Limited is currently generating about -0.08 per unit of risk. If you would invest 1,095 in Sumitomo Chemical Co on November 3, 2024 and sell it today you would lose (16.00) from holding Sumitomo Chemical Co or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Altech Batteries Limited
Performance |
| Timeline |
| Sumitomo Chemical |
| Altech Batteries |
Sumitomo Chemical and Altech Batteries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Altech Batteries
The main advantage of trading using opposite Sumitomo Chemical and Altech Batteries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Altech Batteries 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 Altech Batteries will offset losses from the drop in Altech Batteries' long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| Altech Batteries vs. Nexstar Broadcasting Group | Altech Batteries vs. Mattel Inc | Altech Batteries vs. Hollywood Intermediate | Altech Batteries vs. Mediag3 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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