Correlation Between Sunny Optical and FuelCell Energy

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

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

Diversification Opportunities for Sunny Optical and FuelCell Energy

-0.29

Correlation Coefficient

Sunny Optical  FuelCell Energy

Very good diversification

The 3 months correlation between Sunny and FuelCell is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy and Sunny Optical 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 Optical Technology are associated (or correlated) with FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Sunny Optical i.e., Sunny Optical and FuelCell Energy go up and down completely randomly.

Pair Corralation between Sunny Optical and FuelCell Energy

Assuming the 90 days trading horizon Sunny Optical Technology is expected to generate 0.47 times more return on investment than FuelCell Energy. However, Sunny Optical Technology is 2.14 times less risky than FuelCell Energy. It trades about 0.2 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.0 per unit of risk. If you would invest  4,345  in Sunny Optical Technology on September 14, 2024 and sell it today you would earn a total of  2,430  from holding Sunny Optical Technology or generate 55.93% return on investment over 90 days.

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

Sunny Optical Technology  vs.  FuelCell Energy

Sunny Optical Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

FuelCell Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FuelCell Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sunny Optical and FuelCell Energy

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

The idea behind Sunny Optical Technology and FuelCell Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.