Correlation Between Sumitomo Chemical and Mitsubishi Electric
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Mitsubishi Electric 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 Mitsubishi Electric 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 Mitsubishi Electric Corp, you can compare the effects of market volatilities on Sumitomo Chemical and Mitsubishi Electric 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 Mitsubishi Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Mitsubishi Electric.
Diversification Opportunities for Sumitomo Chemical and Mitsubishi Electric
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sumitomo and Mitsubishi is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Mitsubishi Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric Corp 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 Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric Corp has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Mitsubishi Electric go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Mitsubishi Electric
Assuming the 90 days horizon Sumitomo Chemical Co is expected to generate 1.07 times more return on investment than Mitsubishi Electric. However, Sumitomo Chemical is 1.07 times more volatile than Mitsubishi Electric Corp. It trades about 0.14 of its potential returns per unit of risk. Mitsubishi Electric Corp is currently generating about -0.11 per unit of risk. If you would invest 1,087 in Sumitomo Chemical Co on November 9, 2024 and sell it today you would earn a total of 63.00 from holding Sumitomo Chemical Co or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Mitsubishi Electric Corp
Performance |
| Timeline |
| Sumitomo Chemical |
| Mitsubishi Electric Corp |
Sumitomo Chemical and Mitsubishi Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Mitsubishi Electric
The main advantage of trading using opposite Sumitomo Chemical and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Mitsubishi Electric 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 Mitsubishi Electric will offset losses from the drop in Mitsubishi Electric's long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| Mitsubishi Electric vs. Legrand SA ADR | Mitsubishi Electric vs. Powell Industries | Mitsubishi Electric vs. RF Industries | Mitsubishi Electric vs. Atkore International Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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