Correlation Between Vibhor Steel and Sumitomo Chemical

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

By analyzing existing cross correlation between Vibhor Steel Tubes and Sumitomo Chemical India, you can compare the effects of market volatilities on Vibhor Steel and Sumitomo Chemical 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 Vibhor Steel with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vibhor Steel and Sumitomo Chemical.

Diversification Opportunities for Vibhor Steel and Sumitomo Chemical

0.51

Correlation Coefficient

Vibhor Steel  Sumitomo Chemical

Very weak diversification

The 3 months correlation between Vibhor and Sumitomo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vibhor Steel Tubes and Sumitomo Chemical India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical India and Vibhor Steel 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 Vibhor Steel Tubes are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical India has no effect on the direction of Vibhor Steel i.e., Vibhor Steel and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Vibhor Steel and Sumitomo Chemical

Assuming the 90 days trading horizon Vibhor Steel Tubes is expected to under-perform the Sumitomo Chemical. In addition to that, Vibhor Steel is 1.0 times more volatile than Sumitomo Chemical India. It trades about -0.13 of its total potential returns per unit of risk. Sumitomo Chemical India is currently generating about -0.05 per unit of volatility. If you would invest  56,360  in Sumitomo Chemical India on September 24, 2024 and sell it today you would lose (5,185) from holding Sumitomo Chemical India or give up 9.2% of portfolio value over 90 days.

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

Vibhor Steel Tubes  vs.  Sumitomo Chemical India

Vibhor Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vibhor Steel Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sumitomo Chemical India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Chemical India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Vibhor Steel and Sumitomo Chemical

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

The idea behind Vibhor Steel Tubes and Sumitomo Chemical India 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.