Correlation Between Sunwave Communications and CareRay Digital

Can any of the company-specific risk be diversified away by investing in both Sunwave Communications and CareRay Digital 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 CareRay Digital 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 CareRay Digital Medical, you can compare the effects of market volatilities on Sunwave Communications and CareRay Digital 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 CareRay Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunwave Communications and CareRay Digital.

Diversification Opportunities for Sunwave Communications and CareRay Digital

0.91

Correlation Coefficient

Sunwave Communications  CareRay Digital

Almost no diversification

The 3 months correlation between Sunwave and CareRay is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sunwave Communications Co and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Sunwave Communications i.e., Sunwave Communications and CareRay Digital go up and down completely randomly.

Pair Corralation between Sunwave Communications and CareRay Digital

Assuming the 90 days trading horizon Sunwave Communications Co is expected to generate 1.06 times more return on investment than CareRay Digital. However, Sunwave Communications is 1.06 times more volatile than CareRay Digital Medical. It trades about 0.05 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about 0.0 per unit of risk. If you would invest  595.00  in Sunwave Communications Co on September 12, 2024 and sell it today you would earn a total of  219.00  from holding Sunwave Communications Co or generate 36.81% return on investment over 90 days.

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

Sunwave Communications Co  vs.  CareRay Digital Medical

Sunwave Communications

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunwave Communications Co are ranked lower than 20 (%) 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.

CareRay Digital Medical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunwave Communications and CareRay Digital

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

The idea behind Sunwave Communications Co and CareRay Digital Medical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.