Correlation Between Sungchang Autotech and Rainbow Robotics

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

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

Diversification Opportunities for Sungchang Autotech and Rainbow Robotics

-0.14

Correlation Coefficient

Sungchang Autotech  Rainbow Robotics

Good diversification

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

Pair Corralation between Sungchang Autotech and Rainbow Robotics

Assuming the 90 days trading horizon Sungchang Autotech Co is expected to under-perform the Rainbow Robotics. But the stock apears to be less risky and, when comparing its historical volatility, Sungchang Autotech Co is 4.2 times less risky than Rainbow Robotics. The stock trades about -0.01 of its potential returns per unit of risk. The Rainbow Robotics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  14,370,000  in Rainbow Robotics on December 26, 2024 and sell it today you would earn a total of  12,680,000  from holding Rainbow Robotics or generate 88.24% return on investment over 90 days.

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

Sungchang Autotech Co  vs.  Rainbow Robotics

Sungchang Autotech

Risk-Adjusted Performance

Very Weak

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

Rainbow Robotics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Robotics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rainbow Robotics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sungchang Autotech and Rainbow Robotics

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

The idea behind Sungchang Autotech Co and Rainbow Robotics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.