Correlation Between Varta AG and Sumitomo
Can any of the company-specific risk be diversified away by investing in both Varta AG and Sumitomo 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 Varta AG and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varta AG and Sumitomo, you can compare the effects of market volatilities on Varta AG and Sumitomo 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 Varta AG with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varta AG and Sumitomo.
Diversification Opportunities for Varta AG and Sumitomo
Very good diversification
The 3 months correlation between Varta and Sumitomo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and Varta AG 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 Varta AG are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of Varta AG i.e., Varta AG and Sumitomo go up and down completely randomly.
Pair Corralation between Varta AG and Sumitomo
Assuming the 90 days trading horizon Varta AG is expected to under-perform the Sumitomo. In addition to that, Varta AG is 2.44 times more volatile than Sumitomo. It trades about -0.27 of its total potential returns per unit of risk. Sumitomo is currently generating about 0.04 per unit of volatility. If you would invest 1,938 in Sumitomo on August 29, 2024 and sell it today you would earn a total of 29.00 from holding Sumitomo or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Varta AG vs. Sumitomo
Performance |
| Timeline |
| Varta AG |
| Sumitomo |
Varta AG and Sumitomo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varta AG and Sumitomo
The main advantage of trading using opposite Varta AG and Sumitomo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG position performs unexpectedly, Sumitomo 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 Sumitomo will offset losses from the drop in Sumitomo's long position.| Varta AG vs. CHINA EDUCATION GROUP | Varta AG vs. IDP EDUCATION LTD | Varta AG vs. TAL Education Group | Varta AG vs. DEVRY EDUCATION GRP |
| Sumitomo vs. CeoTronics AG | Sumitomo vs. United Insurance Holdings | Sumitomo vs. CODERE ONLINE LUX | Sumitomo vs. CARSALESCOM |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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