Correlation Between Sumitomo Corp and Arca Continental
Can any of the company-specific risk be diversified away by investing in both Sumitomo Corp and Arca Continental 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 Arca Continental 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 Arca Continental SAB, you can compare the effects of market volatilities on Sumitomo Corp and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Corp and Arca Continental.
Diversification Opportunities for Sumitomo Corp and Arca Continental
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sumitomo and Arca is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Corp ADR and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Sumitomo Corp i.e., Sumitomo Corp and Arca Continental go up and down completely randomly.
Pair Corralation between Sumitomo Corp and Arca Continental
Assuming the 90 days horizon Sumitomo Corp ADR is expected to generate 0.72 times more return on investment than Arca Continental. However, Sumitomo Corp ADR is 1.39 times less risky than Arca Continental. It trades about 0.02 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.01 per unit of risk. If you would invest 2,090 in Sumitomo Corp ADR on November 3, 2024 and sell it today you would earn a total of 69.00 from holding Sumitomo Corp ADR or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Sumitomo Corp ADR vs. Arca Continental SAB
Performance |
| Timeline |
| Sumitomo Corp ADR |
| Arca Continental SAB |
Sumitomo Corp and Arca Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Corp and Arca Continental
The main advantage of trading using opposite Sumitomo Corp and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Corp position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.| Sumitomo Corp vs. Itochu Corp ADR | Sumitomo Corp vs. Mitsubishi Corp | Sumitomo Corp vs. ITOCHU | Sumitomo Corp vs. Marubeni Corp ADR |
| Arca Continental vs. The Coca Cola | Arca Continental vs. Monster Beverage Corp | Arca Continental vs. Celsius Holdings | Arca Continental vs. Coca Cola Consolidated |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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