Correlation Between Sunwave Communications and Shanghai CEO

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

By analyzing existing cross correlation between Sunwave Communications Co and Shanghai CEO Environmental, you can compare the effects of market volatilities on Sunwave Communications and Shanghai CEO 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 Sunwave Communications with a short position of Shanghai CEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunwave Communications and Shanghai CEO.

Diversification Opportunities for Sunwave Communications and Shanghai CEO

0.14

Correlation Coefficient

Sunwave Communications  Shanghai CEO

Average diversification

The 3 months correlation between Sunwave and Shanghai is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sunwave Communications Co and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ and Sunwave Communications 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 Sunwave Communications Co are associated (or correlated) with Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of Sunwave Communications i.e., Sunwave Communications and Shanghai CEO go up and down completely randomly.

Pair Corralation between Sunwave Communications and Shanghai CEO

Assuming the 90 days trading horizon Sunwave Communications is expected to generate 15.49 times less return on investment than Shanghai CEO. But when comparing it to its historical volatility, Sunwave Communications Co is 12.73 times less risky than Shanghai CEO. It trades about 0.03 of its potential returns per unit of risk. Shanghai CEO Environmental is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,310  in Shanghai CEO Environmental on October 26, 2024 and sell it today you would lose (1,443) from holding Shanghai CEO Environmental or give up 62.47% of portfolio value over 90 days.

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

Sunwave Communications Co  vs.  Shanghai CEO Environmental

Sunwave Communications

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunwave Communications Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sunwave Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai CEO Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sunwave Communications and Shanghai CEO

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

The idea behind Sunwave Communications Co and Shanghai CEO Environmental 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.