Correlation Between Valhi and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Valhi and Sumitomo Chemical 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 Valhi and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valhi Inc and Sumitomo Chemical Co, you can compare the effects of market volatilities on Valhi and Sumitomo Chemical 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 Valhi with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Sumitomo Chemical.
Diversification Opportunities for Valhi and Sumitomo Chemical
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valhi and Sumitomo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Valhi 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 Valhi Inc are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Valhi i.e., Valhi and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Valhi and Sumitomo Chemical
Considering the 90-day investment horizon Valhi Inc is expected to generate 1.4 times more return on investment than Sumitomo Chemical. However, Valhi is 1.4 times more volatile than Sumitomo Chemical Co. It trades about 0.24 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about 0.03 per unit of risk. If you would invest 2,174 in Valhi Inc on October 24, 2024 and sell it today you would earn a total of 233.00 from holding Valhi Inc or generate 10.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valhi Inc vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Valhi Inc |
| Sumitomo Chemical |
Valhi and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valhi and Sumitomo Chemical
The main advantage of trading using opposite Valhi and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi position performs unexpectedly, Sumitomo Chemical 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 Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Valhi vs. Huntsman | Valhi vs. Lsb Industries | Valhi vs. Westlake Chemical Partners | Valhi vs. Green Plains Renewable |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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