Correlation Between Apple and Sumitomo Mitsui

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

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

Diversification Opportunities for Apple and Sumitomo Mitsui

0.3

Correlation Coefficient

Apple  Sumitomo Mitsui

Weak diversification

The 3 months correlation between Apple and Sumitomo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and Apple 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 Apple Inc are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of Apple i.e., Apple and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Apple and Sumitomo Mitsui

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.9 times more return on investment than Sumitomo Mitsui. However, Apple Inc is 1.11 times less risky than Sumitomo Mitsui. It trades about 0.16 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about -0.02 per unit of risk. If you would invest  15,712  in Apple Inc on September 20, 2024 and sell it today you would earn a total of  8,433  from holding Apple Inc or generate 53.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.48%
Values	Daily Returns

Apple Inc  vs.  Sumitomo Mitsui Construction

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Sumitomo Mitsui

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

The idea behind Apple Inc and Sumitomo Mitsui Construction 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.