Correlation Between Sumitomo and Hitachi

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

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

Diversification Opportunities for Sumitomo and Hitachi

0.15

Correlation Coefficient

Sumitomo  Hitachi

Average diversification

The 3 months correlation between Sumitomo and Hitachi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Sumitomo i.e., Sumitomo and Hitachi go up and down completely randomly.

Pair Corralation between Sumitomo and Hitachi

Assuming the 90 days trading horizon Sumitomo is expected to generate 3.26 times less return on investment than Hitachi. In addition to that, Sumitomo is 1.09 times more volatile than Hitachi. It trades about 0.02 of its total potential returns per unit of risk. Hitachi is currently generating about 0.06 per unit of volatility. If you would invest  2,305  in Hitachi on May 6, 2025 and sell it today you would earn a total of  145.00  from holding Hitachi or generate 6.29% return on investment over 90 days.

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

Sumitomo  vs.  Hitachi

Sumitomo

Risk-Adjusted Performance

Weak

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

Hitachi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Hitachi may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Sumitomo and Hitachi

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

The idea behind Sumitomo and Hitachi 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.