Correlation Between Sumitomo Mitsui and Daiwa Securities
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Daiwa Securities 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 Mitsui and Daiwa Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Trust and Daiwa Securities Group, you can compare the effects of market volatilities on Sumitomo Mitsui and Daiwa Securities 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 Mitsui with a short position of Daiwa Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Daiwa Securities.
Diversification Opportunities for Sumitomo Mitsui and Daiwa Securities
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Daiwa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Trust and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities and Sumitomo Mitsui 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 Mitsui Trust are associated (or correlated) with Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Daiwa Securities go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Daiwa Securities
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 1.04 times less return on investment than Daiwa Securities. But when comparing it to its historical volatility, Sumitomo Mitsui Trust is 1.45 times less risky than Daiwa Securities. It trades about 0.06 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 426.00 in Daiwa Securities Group on September 3, 2024 and sell it today you would earn a total of 224.00 from holding Daiwa Securities Group or generate 52.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Trust vs. Daiwa Securities Group
Performance |
| Timeline |
| Sumitomo Mitsui Trust |
| Daiwa Securities |
Sumitomo Mitsui and Daiwa Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Daiwa Securities
The main advantage of trading using opposite Sumitomo Mitsui and Daiwa Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Daiwa Securities 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 Daiwa Securities will offset losses from the drop in Daiwa Securities' long position.| Sumitomo Mitsui vs. MSAD Insurance Group | Sumitomo Mitsui vs. Svenska Handelsbanken PK | Sumitomo Mitsui vs. Sekisui House Ltd | Sumitomo Mitsui vs. Daiwa House Industry |
| Daiwa Securities vs. Daiwa House Industry | Daiwa Securities vs. Dai Nippon Printing | Daiwa Securities vs. MSAD Insurance Group | Daiwa Securities vs. Sumitomo Mitsui Trust |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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