Correlation Between Sumitomo Chemical and Nitto Denko
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Nitto Denko 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 Nitto Denko 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 Nitto Denko Corp, you can compare the effects of market volatilities on Sumitomo Chemical and Nitto Denko 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 Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Nitto Denko.
Diversification Opportunities for Sumitomo Chemical and Nitto Denko
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and Nitto is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko 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 Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Nitto Denko go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Nitto Denko
Assuming the 90 days horizon Sumitomo Chemical Co is expected to under-perform the Nitto Denko. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical Co is 1.05 times less risky than Nitto Denko. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Nitto Denko Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,171 in Nitto Denko Corp on November 9, 2024 and sell it today you would earn a total of 714.00 from holding Nitto Denko Corp or generate 60.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Nitto Denko Corp
Performance |
| Timeline |
| Sumitomo Chemical |
| Nitto Denko Corp |
Sumitomo Chemical and Nitto Denko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Nitto Denko
The main advantage of trading using opposite Sumitomo Chemical and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko's long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| Nitto Denko vs. Chemours Co | Nitto Denko vs. International Flavors Fragrances | Nitto Denko vs. Air Products and | Nitto Denko vs. PPG Industries |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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