Correlation Between Sumitomo Mitsui and Zimplats Holdings

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

Diversification Opportunities for Sumitomo Mitsui and Zimplats Holdings

-0.88

Correlation Coefficient

Sumitomo Mitsui  Zimplats Holdings

Pay attention - limited upside

The 3 months correlation between Sumitomo and Zimplats is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Zimplats Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimplats Holdings 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 Zimplats Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimplats Holdings has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Zimplats Holdings go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Zimplats Holdings

Given the investment horizon of 90 days Sumitomo Mitsui Financial is expected to generate 0.96 times more return on investment than Zimplats Holdings. However, Sumitomo Mitsui Financial is 1.04 times less risky than Zimplats Holdings. It trades about 0.02 of its potential returns per unit of risk. Zimplats Holdings Limited is currently generating about -0.21 per unit of risk. If you would invest  1,124  in Sumitomo Mitsui Financial on January 31, 2024 and sell it today you would earn a total of  8.00  from holding Sumitomo Mitsui Financial or generate 0.71% return on investment over 90 days.

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

Sumitomo Mitsui Financial  vs.  Zimplats Holdings Limited

Sumitomo Mitsui Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sumitomo Mitsui and Zimplats Holdings

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

The idea behind Sumitomo Mitsui Financial and Zimplats Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.