Correlation Between Apple and Sumitomo Chemical

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

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

Diversification Opportunities for Apple and Sumitomo Chemical

0.34

Correlation Coefficient

Apple  Sumitomo Chemical

Weak diversification

The 3 months correlation between Apple and Sumitomo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Apple and Sumitomo Chemical

Assuming the 90 days trading horizon Apple is expected to generate 6.31 times less return on investment than Sumitomo Chemical. But when comparing it to its historical volatility, Apple Inc is 1.0 times less risky than Sumitomo Chemical. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Sumitomo Chemical on April 24, 2025 and sell it today you would earn a total of  10.00  from holding Sumitomo Chemical or generate 4.9% return on investment over 90 days.

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

Apple Inc  vs.  Sumitomo Chemical

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Apple is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Sumitomo Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Sumitomo Chemical

The main advantage of trading using opposite Apple and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and Sumitomo Chemical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.