Correlation Between Sumitomo Corp and Kyocera ADR

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

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

Diversification Opportunities for Sumitomo Corp and Kyocera ADR

0.47

Correlation Coefficient

Sumitomo Corp  Kyocera ADR

Very weak diversification

The 3 months correlation between Sumitomo and Kyocera is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Corp ADR and Kyocera ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyocera ADR and Sumitomo Corp 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 Corp ADR are associated (or correlated) with Kyocera ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyocera ADR has no effect on the direction of Sumitomo Corp i.e., Sumitomo Corp and Kyocera ADR go up and down completely randomly.

Pair Corralation between Sumitomo Corp and Kyocera ADR

If you would invest  2,363  in Sumitomo Corp ADR on January 30, 2024 and sell it today you would earn a total of  160.00  from holding Sumitomo Corp ADR or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Sumitomo Corp ADR  vs.  Kyocera ADR

Sumitomo Corp ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Corp ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Sumitomo Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Kyocera ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sumitomo Corp and Kyocera ADR

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

The idea behind Sumitomo Corp ADR and Kyocera ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..