Correlation Between Polyplex (Thailand) and Sumitomo Rubber

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

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

Diversification Opportunities for Polyplex (Thailand) and Sumitomo Rubber

0.59

Correlation Coefficient

Polyplex (Thailand)  Sumitomo Rubber

Very weak diversification

The 3 months correlation between Polyplex and Sumitomo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Polyplex Public and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Polyplex (Thailand) 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 Polyplex Public are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Polyplex (Thailand) i.e., Polyplex (Thailand) and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Polyplex (Thailand) and Sumitomo Rubber

Assuming the 90 days horizon Polyplex Public is expected to generate 6.98 times more return on investment than Sumitomo Rubber. However, Polyplex (Thailand) is 6.98 times more volatile than Sumitomo Rubber Industries. It trades about 0.14 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.11 per unit of risk. If you would invest  13.00  in Polyplex Public on September 4, 2024 and sell it today you would earn a total of  21.00  from holding Polyplex Public or generate 161.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Polyplex Public  vs.  Sumitomo Rubber Industries

Polyplex (Thailand)

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polyplex Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Polyplex (Thailand) reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Rubber Indu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polyplex (Thailand) and Sumitomo Rubber

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

The idea behind Polyplex Public and Sumitomo Rubber Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.