Correlation Between Dell Technologies and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Dell Technologies and Sumitomo Mitsui 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 Dell Technologies and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dell Technologies and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Dell Technologies and Sumitomo Mitsui 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 Dell Technologies with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Sumitomo Mitsui.
Diversification Opportunities for Dell Technologies and Sumitomo Mitsui
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dell and Sumitomo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and Dell Technologies 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 Dell Technologies are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Dell Technologies i.e., Dell Technologies and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Dell Technologies and Sumitomo Mitsui
Assuming the 90 days trading horizon Dell Technologies is expected to generate 1.88 times less return on investment than Sumitomo Mitsui. In addition to that, Dell Technologies is 1.38 times more volatile than Sumitomo Mitsui Financial. It trades about 0.09 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.24 per unit of volatility. If you would invest 6,819 in Sumitomo Mitsui Financial on September 18, 2024 and sell it today you would earn a total of 2,208 from holding Sumitomo Mitsui Financial or generate 32.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.16% |
Values | Daily Returns |
Dell Technologies vs. Sumitomo Mitsui Financial
Performance |
Timeline |
Dell Technologies |
Sumitomo Mitsui Financial |
Dell Technologies and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dell Technologies and Sumitomo Mitsui
The main advantage of trading using opposite Dell Technologies and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies position performs unexpectedly, Sumitomo Mitsui 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 Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.Dell Technologies vs. Delta Air Lines | Dell Technologies vs. Charter Communications | Dell Technologies vs. Align Technology | Dell Technologies vs. Palantir Technologies |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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