Correlation Between SUMITOMO P and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both SUMITOMO P and STMICROELECTRONICS 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 P and STMICROELECTRONICS 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 STMICROELECTRONICS, you can compare the effects of market volatilities on SUMITOMO P and STMICROELECTRONICS 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 P with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUMITOMO P and STMICROELECTRONICS.
Diversification Opportunities for SUMITOMO P and STMICROELECTRONICS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SUMITOMO and STMICROELECTRONICS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SUMITOMO P SP and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and SUMITOMO P 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of SUMITOMO P i.e., SUMITOMO P and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between SUMITOMO P and STMICROELECTRONICS
Assuming the 90 days trading horizon SUMITOMO P SP is expected to generate 0.71 times more return on investment than STMICROELECTRONICS. However, SUMITOMO P SP is 1.41 times less risky than STMICROELECTRONICS. It trades about -0.05 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.13 per unit of risk. If you would invest 2,100 in SUMITOMO P SP on September 2, 2024 and sell it today you would lose (110.00) from holding SUMITOMO P SP or give up 5.24% 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. STMICROELECTRONICS
Performance |
| Timeline |
| SUMITOMO P SP |
| STMICROELECTRONICS |
SUMITOMO P and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SUMITOMO P and STMICROELECTRONICS
The main advantage of trading using opposite SUMITOMO P and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUMITOMO P position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| SUMITOMO P vs. CompuGroup Medical SE | SUMITOMO P vs. ONWARD MEDICAL BV | SUMITOMO P vs. TITANIUM TRANSPORTGROUP | SUMITOMO P vs. Compugroup Medical SE |
| STMICROELECTRONICS vs. Align Technology | STMICROELECTRONICS vs. AIR PRODCHEMICALS | STMICROELECTRONICS vs. Micron Technology | STMICROELECTRONICS vs. AECOM TECHNOLOGY |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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