Correlation Between Lee Chi and Sun Race

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

By analyzing existing cross correlation between Lee Chi Enterprises and Sun Race Sturmey Archer, you can compare the effects of market volatilities on Lee Chi and Sun Race 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 Lee Chi with a short position of Sun Race. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Sun Race.

Diversification Opportunities for Lee Chi and Sun Race

0.79

Correlation Coefficient

Lee Chi  Sun Race

Poor diversification

The 3 months correlation between Lee and Sun is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and Sun Race Sturmey Archer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Race Sturmey and Lee Chi 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 Lee Chi Enterprises are associated (or correlated) with Sun Race. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Race Sturmey has no effect on the direction of Lee Chi i.e., Lee Chi and Sun Race go up and down completely randomly.

Pair Corralation between Lee Chi and Sun Race

Assuming the 90 days trading horizon Lee Chi is expected to generate 3.03 times less return on investment than Sun Race. But when comparing it to its historical volatility, Lee Chi Enterprises is 1.36 times less risky than Sun Race. It trades about 0.06 of its potential returns per unit of risk. Sun Race Sturmey Archer is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,325  in Sun Race Sturmey Archer on December 20, 2024 and sell it today you would earn a total of  270.00  from holding Sun Race Sturmey Archer or generate 11.61% return on investment over 90 days.

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

Lee Chi Enterprises  vs.  Sun Race Sturmey Archer

Lee Chi Enterprises

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lee Chi Enterprises are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lee Chi is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sun Race Sturmey

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Race Sturmey Archer are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Race showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lee Chi and Sun Race

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

The idea behind Lee Chi Enterprises and Sun Race Sturmey Archer 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.