Correlation Between Sunny Electronics and COWAY

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

By analyzing existing cross correlation between Sunny Electronics Corp and COWAY Co, you can compare the effects of market volatilities on Sunny Electronics and COWAY 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 Sunny Electronics with a short position of COWAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Electronics and COWAY.

Diversification Opportunities for Sunny Electronics and COWAY

0.21

Correlation Coefficient

Sunny Electronics  COWAY

Modest diversification

The 3 months correlation between Sunny and COWAY is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Electronics Corp and COWAY Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COWAY and Sunny Electronics 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 Sunny Electronics Corp are associated (or correlated) with COWAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COWAY has no effect on the direction of Sunny Electronics i.e., Sunny Electronics and COWAY go up and down completely randomly.

Pair Corralation between Sunny Electronics and COWAY

Assuming the 90 days trading horizon Sunny Electronics Corp is expected to under-perform the COWAY. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Electronics Corp is 1.03 times less risky than COWAY. The stock trades about 0.0 of its potential returns per unit of risk. The COWAY Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,700,000  in COWAY Co on December 31, 2024 and sell it today you would earn a total of  1,800,000  from holding COWAY Co or generate 26.87% return on investment over 90 days.

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

Sunny Electronics Corp  vs.  COWAY Co

Sunny Electronics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunny Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sunny Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

COWAY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COWAY Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COWAY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Electronics and COWAY

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

The idea behind Sunny Electronics Corp and COWAY Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..