Correlation Between Sumitomo Mitsui and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and China BlueChemical 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 China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Construction and China BlueChemical, you can compare the effects of market volatilities on Sumitomo Mitsui and China BlueChemical 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 China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and China BlueChemical.
Diversification Opportunities for Sumitomo Mitsui and China BlueChemical
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sumitomo and China is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 Construction are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and China BlueChemical go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and China BlueChemical
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 1.25 times less return on investment than China BlueChemical. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 2.44 times less risky than China BlueChemical. It trades about 0.11 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 21.00 in China BlueChemical on September 6, 2024 and sell it today you would earn a total of 2.00 from holding China BlueChemical or generate 9.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Mitsui Construction vs. China BlueChemical
Performance |
Timeline |
Sumitomo Mitsui Cons |
China BlueChemical |
Sumitomo Mitsui and China BlueChemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Mitsui and China BlueChemical
The main advantage of trading using opposite Sumitomo Mitsui and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.Sumitomo Mitsui vs. THORNEY TECHS LTD | Sumitomo Mitsui vs. ALEFARM BREWING DK 05 | Sumitomo Mitsui vs. PKSHA TECHNOLOGY INC | Sumitomo Mitsui vs. NetSol Technologies |
China BlueChemical vs. Fast Retailing Co | China BlueChemical vs. Microbot Medical | China BlueChemical vs. Auto Trader Group | China BlueChemical vs. MARKET VECTR RETAIL |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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