Correlation Between Sumitomo Chemical and First Graphene
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and First Graphene 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 First Graphene 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 First Graphene, you can compare the effects of market volatilities on Sumitomo Chemical and First Graphene 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 First Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and First Graphene.
Diversification Opportunities for Sumitomo Chemical and First Graphene
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and First Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Graphene 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 First Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Graphene has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and First Graphene go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and First Graphene
Assuming the 90 days horizon Sumitomo Chemical Co is expected to under-perform the First Graphene. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical Co is 6.89 times less risky than First Graphene. The pink sheet trades about -0.02 of its potential returns per unit of risk. The First Graphene is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.00 in First Graphene on August 31, 2024 and sell it today you would lose (3.90) from holding First Graphene or give up 65.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. First Graphene
Performance |
| Timeline |
| Sumitomo Chemical |
| First Graphene |
Sumitomo Chemical and First Graphene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and First Graphene
The main advantage of trading using opposite Sumitomo Chemical and First Graphene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, First Graphene 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 First Graphene will offset losses from the drop in First Graphene's long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| First Graphene vs. Haydale Graphene Industries | First Graphene vs. Versarien plc | First Graphene vs. NanoXplore | First Graphene vs. G6 Materials 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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