Correlation Between Sumitomo and CITIC

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

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

Diversification Opportunities for Sumitomo and CITIC

-0.01

Correlation Coefficient

Sumitomo  CITIC

Good diversification

The 3 months correlation between Sumitomo and CITIC is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and Sumitomo 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 are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Sumitomo i.e., Sumitomo and CITIC go up and down completely randomly.

Pair Corralation between Sumitomo and CITIC

Assuming the 90 days trading horizon Sumitomo is expected to generate 2.9 times less return on investment than CITIC. In addition to that, Sumitomo is 1.2 times more volatile than CITIC Limited. It trades about 0.06 of its total potential returns per unit of risk. CITIC Limited is currently generating about 0.21 per unit of volatility. If you would invest  97.00  in CITIC Limited on April 20, 2025 and sell it today you would earn a total of  21.00  from holding CITIC Limited or generate 21.65% return on investment over 90 days.

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

Sumitomo  vs.  CITIC Limited

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 uncertain primary indicators, Sumitomo may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CITIC Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo and CITIC

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

The idea behind Sumitomo and CITIC Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.