Correlation Between Sumitomo Chemical and AB SKF
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and AB SKF 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 AB SKF 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 AB SKF, you can compare the effects of market volatilities on Sumitomo Chemical and AB SKF 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 AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and AB SKF.
Diversification Opportunities for Sumitomo Chemical and AB SKF
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sumitomo and SKFRY is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and AB SKF go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and AB SKF
Assuming the 90 days horizon Sumitomo Chemical Co is expected to generate 1.19 times more return on investment than AB SKF. However, Sumitomo Chemical is 1.19 times more volatile than AB SKF. It trades about 0.14 of its potential returns per unit of risk. AB SKF is currently generating about 0.14 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. AB SKF
Performance |
| Timeline |
| Sumitomo Chemical |
| AB SKF |
Sumitomo Chemical and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and AB SKF
The main advantage of trading using opposite Sumitomo Chemical and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, AB SKF 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 AB SKF will offset losses from the drop in AB SKF's long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
| AB SKF vs. Eastern Co | AB SKF vs. Hillman Solutions Corp | AB SKF vs. Techtronic Industries Ltd | AB SKF vs. Husqvarna AB |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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