Correlation Between Sumitomo Mitsui and Target

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Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Target 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 Target 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 Target, you can compare the effects of market volatilities on Sumitomo Mitsui and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Target.

Diversification Opportunities for Sumitomo Mitsui and Target

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sumitomo and Target is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Target go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Target

Assuming the 90 days trading horizon Sumitomo Mitsui is expected to generate 1.57 times less return on investment than Target. But when comparing it to its historical volatility, Sumitomo Mitsui Financial is 1.66 times less risky than Target. It trades about 0.07 of its potential returns per unit of risk. Target is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  53,417  in Target on April 20, 2025 and sell it today you would earn a total of  4,233  from holding Target or generate 7.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sumitomo Mitsui Financial  vs.  Target

 Performance 
       Timeline  
Sumitomo Mitsui Financial 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Target 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Target may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Sumitomo Mitsui and Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sumitomo Mitsui and Target

The main advantage of trading using opposite Sumitomo Mitsui and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.
The idea behind Sumitomo Mitsui Financial and Target 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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