Correlation Between Sumitomo Mitsui and Penta Ocean
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Penta Ocean 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 Penta Ocean 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 Penta Ocean Construction Co, you can compare the effects of market volatilities on Sumitomo Mitsui and Penta Ocean 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 Penta Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Penta Ocean.
Diversification Opportunities for Sumitomo Mitsui and Penta Ocean
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Penta is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Penta Ocean go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Penta Ocean
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 1.05 times more return on investment than Penta Ocean. However, Sumitomo Mitsui is 1.05 times more volatile than Penta Ocean Construction Co. It trades about 0.11 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.02 per unit of risk. If you would invest 234.00 in Sumitomo Mitsui Construction on September 7, 2024 and sell it today you would earn a total of 24.00 from holding Sumitomo Mitsui Construction or generate 10.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Mitsui Construction vs. Penta Ocean Construction Co
Performance |
Timeline |
Sumitomo Mitsui Cons |
Penta Ocean Construc |
Sumitomo Mitsui and Penta Ocean Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Mitsui and Penta Ocean
The main advantage of trading using opposite Sumitomo Mitsui and Penta Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Penta Ocean 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 Penta Ocean will offset losses from the drop in Penta Ocean's long position.Sumitomo Mitsui vs. Kaiser Aluminum | Sumitomo Mitsui vs. Japan Medical Dynamic | Sumitomo Mitsui vs. MEDICAL FACILITIES NEW | Sumitomo Mitsui vs. Merit Medical Systems |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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