Correlation Between CoStar and Sumitomo Realty

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

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

Diversification Opportunities for CoStar and Sumitomo Realty

0.08

Correlation Coefficient

CoStar  Sumitomo Realty

Significant diversification

The 3 months correlation between CoStar and Sumitomo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CoStar Group and Sumitomo Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Realty Deve and CoStar 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 CoStar Group are associated (or correlated) with Sumitomo Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Realty Deve has no effect on the direction of CoStar i.e., CoStar and Sumitomo Realty go up and down completely randomly.

Pair Corralation between CoStar and Sumitomo Realty

Given the investment horizon of 90 days CoStar Group is expected to generate 0.54 times more return on investment than Sumitomo Realty. However, CoStar Group is 1.86 times less risky than Sumitomo Realty. It trades about 0.27 of its potential returns per unit of risk. Sumitomo Realty Development is currently generating about 0.02 per unit of risk. If you would invest  7,538  in CoStar Group on May 10, 2025 and sell it today you would earn a total of  1,996  from holding CoStar Group or generate 26.48% return on investment over 90 days.

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

CoStar Group  vs.  Sumitomo Realty Development

CoStar Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, CoStar reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Realty Deve

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Realty Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Sumitomo Realty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CoStar and Sumitomo Realty

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

The idea behind CoStar Group and Sumitomo Realty Development 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 Global Correlations module to find global opportunities by holding instruments from different markets.