Correlation Between Sumitomo Chemical and Roto Pumps
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By analyzing existing cross correlation between Sumitomo Chemical India and Roto Pumps Limited, you can compare the effects of market volatilities on Sumitomo Chemical and Roto Pumps 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 Roto Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Roto Pumps.
Diversification Opportunities for Sumitomo Chemical and Roto Pumps
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sumitomo and Roto is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical India and Roto Pumps Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roto Pumps Limited 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 India are associated (or correlated) with Roto Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roto Pumps Limited has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Roto Pumps go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Roto Pumps
Assuming the 90 days trading horizon Sumitomo Chemical India is expected to generate 0.69 times more return on investment than Roto Pumps. However, Sumitomo Chemical India is 1.46 times less risky than Roto Pumps. It trades about 0.05 of its potential returns per unit of risk. Roto Pumps Limited is currently generating about -0.19 per unit of risk. If you would invest 52,405 in Sumitomo Chemical India on November 8, 2024 and sell it today you would earn a total of 1,140 from holding Sumitomo Chemical India or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical India vs. Roto Pumps Limited
Performance |
| Timeline |
| Sumitomo Chemical India |
| Roto Pumps Limited |
Sumitomo Chemical and Roto Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Roto Pumps
The main advantage of trading using opposite Sumitomo Chemical and Roto Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Roto Pumps 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 Roto Pumps will offset losses from the drop in Roto Pumps' long position.The idea behind Sumitomo Chemical India and Roto Pumps Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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