Correlation Between Sumitomo Rubber and DALATA HOTEL

Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and DALATA HOTEL 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 Rubber and DALATA HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumitomo Rubber Industries and DALATA HOTEL, you can compare the effects of market volatilities on Sumitomo Rubber and DALATA HOTEL 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 Rubber with a short position of DALATA HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and DALATA HOTEL.

Diversification Opportunities for Sumitomo Rubber and DALATA HOTEL

0.77

Correlation Coefficient

Sumitomo Rubber  DALATA HOTEL

Poor diversification

The 3 months correlation between Sumitomo and DALATA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL and Sumitomo Rubber 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 Rubber Industries are associated (or correlated) with DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and DALATA HOTEL go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and DALATA HOTEL

Assuming the 90 days horizon Sumitomo Rubber is expected to generate 3.2 times less return on investment than DALATA HOTEL. In addition to that, Sumitomo Rubber is 1.07 times more volatile than DALATA HOTEL. It trades about 0.07 of its total potential returns per unit of risk. DALATA HOTEL is currently generating about 0.24 per unit of volatility. If you would invest  414.00  in DALATA HOTEL on September 24, 2024 and sell it today you would earn a total of  28.00  from holding DALATA HOTEL or generate 6.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sumitomo Rubber Industries  vs.  DALATA HOTEL

Sumitomo Rubber Indu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DALATA HOTEL

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DALATA HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Rubber and DALATA HOTEL

The main advantage of trading using opposite Sumitomo Rubber and DALATA HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, DALATA HOTEL 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 DALATA HOTEL will offset losses from the drop in DALATA HOTEL's long position.

The idea behind Sumitomo Rubber Industries and DALATA HOTEL 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.