Correlation Between Sumitomo Chemical and Valhi
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Valhi 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 Valhi 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 Valhi Inc, you can compare the effects of market volatilities on Sumitomo Chemical and Valhi 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 Valhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Valhi.
Diversification Opportunities for Sumitomo Chemical and Valhi
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sumitomo and Valhi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc 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 Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Valhi go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Valhi
Assuming the 90 days horizon Sumitomo Chemical Co is expected to generate 0.65 times more return on investment than Valhi. However, Sumitomo Chemical Co is 1.54 times less risky than Valhi. It trades about -0.03 of its potential returns per unit of risk. Valhi Inc is currently generating about -0.09 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Valhi Inc
Performance |
| Timeline |
| Sumitomo Chemical |
| Valhi Inc |
Sumitomo Chemical and Valhi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Valhi
The main advantage of trading using opposite Sumitomo Chemical and Valhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Valhi 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 Valhi will offset losses from the drop in Valhi's long position.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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