Correlation Between S P and Sumitomo Chemical

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

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

Diversification Opportunities for S P and Sumitomo Chemical

-0.02

Correlation Coefficient

S P  Sumitomo Chemical

Good diversification

The 3 months correlation between SPAL and Sumitomo is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels 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 S P 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 S P Apparels 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 S P i.e., S P and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between S P and Sumitomo Chemical

Assuming the 90 days trading horizon S P Apparels is expected to generate 1.52 times more return on investment than Sumitomo Chemical. However, S P is 1.52 times more volatile than Sumitomo Chemical India. It trades about 0.06 of its potential returns per unit of risk. Sumitomo Chemical India is currently generating about 0.08 per unit of risk. If you would invest  73,625  in S P Apparels on April 20, 2025 and sell it today you would earn a total of  7,105  from holding S P Apparels or generate 9.65% return on investment over 90 days.

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

S P Apparels  vs.  Sumitomo Chemical India

S P Apparels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, S P may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Sumitomo Chemical India

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical India are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Sumitomo Chemical may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with S P and Sumitomo Chemical

The main advantage of trading using opposite S P and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S P 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 S P Apparels 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.