Correlation Between Sumitomo Mitsui and Penta-Ocean Construction

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Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Penta-Ocean Construction 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 Construction 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 Construction 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 Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Penta-Ocean Construction.

Diversification Opportunities for Sumitomo Mitsui and Penta-Ocean Construction

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sumitomo and Penta-Ocean is 0.63. 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 Construction 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 Construction. 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 Construction has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Penta-Ocean Construction go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Penta-Ocean Construction

Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 1.06 times more return on investment than Penta-Ocean Construction. However, Sumitomo Mitsui is 1.06 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 0.0 per unit of risk. If you would invest  232.00  in Sumitomo Mitsui Construction on September 6, 2024 and sell it today you would earn a total of  24.00  from holding Sumitomo Mitsui Construction or generate 10.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sumitomo Mitsui Construction  vs.  Penta Ocean Construction Co

 Performance 
       Timeline  
Sumitomo Mitsui Cons 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Penta-Ocean Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta-Ocean Construction is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Mitsui and Penta-Ocean Construction Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sumitomo Mitsui and Penta-Ocean Construction

The main advantage of trading using opposite Sumitomo Mitsui and Penta-Ocean Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Penta-Ocean Construction 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 Construction will offset losses from the drop in Penta-Ocean Construction's long position.
The idea behind Sumitomo Mitsui Construction and Penta Ocean Construction Co 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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