Correlation Between Transport International and Sumitomo Rubber

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

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

Diversification Opportunities for Transport International and Sumitomo Rubber

0.37

Correlation Coefficient

Transport International  Sumitomo Rubber

Weak diversification

The 3 months correlation between Transport and Sumitomo is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Transport International 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 Transport International Holdings are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Transport International i.e., Transport International and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Transport International and Sumitomo Rubber

Assuming the 90 days horizon Transport International Holdings is expected to generate 1.36 times more return on investment than Sumitomo Rubber. However, Transport International is 1.36 times more volatile than Sumitomo Rubber Industries. It trades about 0.12 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about -0.13 per unit of risk. If you would invest  103.00  in Transport International Holdings on February 13, 2024 and sell it today you would earn a total of  5.00  from holding Transport International Holdings or generate 4.85% return on investment over 90 days.

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

Transport International Holdin  vs.  Sumitomo Rubber Industries

Transport International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transport International Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Transport International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Sumitomo Rubber Indu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Rubber is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Transport International and Sumitomo Rubber

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

The idea behind Transport International Holdings and Sumitomo Rubber Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.