Correlation Between ITOCHU and Sumitomo

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

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

Diversification Opportunities for ITOCHU and Sumitomo

0.89

Correlation Coefficient

ITOCHU  Sumitomo

Very poor diversification

The 3 months correlation between ITOCHU and Sumitomo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and ITOCHU 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 ITOCHU are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of ITOCHU i.e., ITOCHU and Sumitomo go up and down completely randomly.

Pair Corralation between ITOCHU and Sumitomo

Assuming the 90 days horizon ITOCHU is expected to under-perform the Sumitomo. But the stock apears to be less risky and, when comparing its historical volatility, ITOCHU is 1.26 times less risky than Sumitomo. The stock trades about -0.11 of its potential returns per unit of risk. The Sumitomo is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,228  in Sumitomo on March 31, 2025 and sell it today you would lose (10.00) from holding Sumitomo or give up 0.45% of portfolio value over 90 days.

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

ITOCHU  vs.  Sumitomo

ITOCHU

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ITOCHU are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ITOCHU may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Sumitomo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Sumitomo may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with ITOCHU and Sumitomo

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

The idea behind ITOCHU and Sumitomo 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.