Correlation Between Sumitomo Mitsui and Victrex Plc

Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Victrex Plc 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 Victrex Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumitomo Mitsui Financial and Victrex plc, you can compare the effects of market volatilities on Sumitomo Mitsui and Victrex Plc 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 Victrex Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Victrex Plc.

Diversification Opportunities for Sumitomo Mitsui and Victrex Plc

-0.71

Correlation Coefficient

Sumitomo Mitsui  Victrex Plc

Pay attention - limited upside

The 3 months correlation between Sumitomo and Victrex is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Victrex plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victrex plc 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 Financial are associated (or correlated) with Victrex Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victrex plc has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Victrex Plc go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Victrex Plc

Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 1.26 times more return on investment than Victrex Plc. However, Sumitomo Mitsui is 1.26 times more volatile than Victrex plc. It trades about 0.08 of its potential returns per unit of risk. Victrex plc is currently generating about 0.0 per unit of risk. If you would invest  1,879  in Sumitomo Mitsui Financial on September 27, 2024 and sell it today you would earn a total of  406.00  from holding Sumitomo Mitsui Financial or generate 21.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  Victrex plc

Sumitomo Mitsui Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

Victrex plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sumitomo Mitsui and Victrex Plc

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

The idea behind Sumitomo Mitsui Financial and Victrex plc 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.