Correlation Between SUMITOMO CORP and International Business
Can any of the company-specific risk be diversified away by investing in both SUMITOMO CORP and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SUMITOMO P SP and International Business Machines, you can compare the effects of market volatilities on SUMITOMO CORP and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUMITOMO CORP and International Business.
Diversification Opportunities for SUMITOMO CORP and International Business
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SUMITOMO and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SUMITOMO P SP and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 P SP are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of SUMITOMO CORP i.e., SUMITOMO CORP and International Business go up and down completely randomly.
Pair Corralation between SUMITOMO CORP and International Business
Assuming the 90 days trading horizon SUMITOMO P SP is expected to generate 1.7 times more return on investment than International Business. However, SUMITOMO CORP is 1.7 times more volatile than International Business Machines. It trades about -0.03 of its potential returns per unit of risk. International Business Machines is currently generating about -0.27 per unit of risk. If you would invest 2,160 in SUMITOMO P SP on December 7, 2024 and sell it today you would lose (40.00) from holding SUMITOMO P SP or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SUMITOMO P SP vs. International Business Machine
Performance |
| Timeline |
| SUMITOMO P SP |
| International Business |
SUMITOMO CORP and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SUMITOMO CORP and International Business
The main advantage of trading using opposite SUMITOMO CORP and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUMITOMO CORP position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| SUMITOMO CORP vs. ECHO INVESTMENT ZY | SUMITOMO CORP vs. GRIFFIN MINING LTD | SUMITOMO CORP vs. New Residential Investment | SUMITOMO CORP vs. MAG SILVER |
| International Business vs. China Foods Limited | International Business vs. COFCO Joycome Foods | International Business vs. ETFS Coffee ETC | International Business vs. Gaztransport Technigaz SA |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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