Correlation Between Sumitomo Corp and RCABS
Can any of the company-specific risk be diversified away by investing in both Sumitomo Corp and RCABS 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 Corp and RCABS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Corp ADR and RCABS Inc, you can compare the effects of market volatilities on Sumitomo Corp and RCABS 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 Corp with a short position of RCABS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Corp and RCABS.
Diversification Opportunities for Sumitomo Corp and RCABS
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and RCABS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Corp ADR and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc and Sumitomo Corp 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 Corp ADR are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Sumitomo Corp i.e., Sumitomo Corp and RCABS go up and down completely randomly.
Pair Corralation between Sumitomo Corp and RCABS
Assuming the 90 days horizon Sumitomo Corp ADR is expected to generate 0.14 times more return on investment than RCABS. However, Sumitomo Corp ADR is 7.18 times less risky than RCABS. It trades about -0.13 of its potential returns per unit of risk. RCABS Inc is currently generating about -0.08 per unit of risk. If you would invest 2,163 in Sumitomo Corp ADR on August 31, 2024 and sell it today you would lose (81.00) from holding Sumitomo Corp ADR or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Corp ADR vs. RCABS Inc
Performance |
| Timeline |
| Sumitomo Corp ADR |
| RCABS Inc |
Sumitomo Corp and RCABS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Corp and RCABS
The main advantage of trading using opposite Sumitomo Corp and RCABS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Corp position performs unexpectedly, RCABS 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 RCABS will offset losses from the drop in RCABS's long position.| Sumitomo Corp vs. Itochu Corp ADR | Sumitomo Corp vs. Mitsubishi Corp | Sumitomo Corp vs. ITOCHU | Sumitomo Corp vs. Marubeni Corp ADR |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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