Correlation Between Chung Hung and Sunny Friend

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

By analyzing existing cross correlation between Chung Hung Steel and Sunny Friend Environmental, you can compare the effects of market volatilities on Chung Hung and Sunny Friend 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 Chung Hung with a short position of Sunny Friend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Sunny Friend.

Diversification Opportunities for Chung Hung and Sunny Friend

0.64

Correlation Coefficient

Chung Hung  Sunny Friend

Poor diversification

The 3 months correlation between Chung and Sunny is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Sunny Friend Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Friend Environ and Chung Hung 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 Chung Hung Steel are associated (or correlated) with Sunny Friend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Friend Environ has no effect on the direction of Chung Hung i.e., Chung Hung and Sunny Friend go up and down completely randomly.

Pair Corralation between Chung Hung and Sunny Friend

Assuming the 90 days trading horizon Chung Hung is expected to generate 1.36 times less return on investment than Sunny Friend. In addition to that, Chung Hung is 1.27 times more volatile than Sunny Friend Environmental. It trades about 0.03 of its total potential returns per unit of risk. Sunny Friend Environmental is currently generating about 0.04 per unit of volatility. If you would invest  8,750  in Sunny Friend Environmental on September 14, 2024 and sell it today you would earn a total of  370.00  from holding Sunny Friend Environmental or generate 4.23% return on investment over 90 days.

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

Chung Hung Steel  vs.  Sunny Friend Environmental

Chung Hung Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chung Hung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sunny Friend Environ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Friend Environmental are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sunny Friend is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chung Hung and Sunny Friend

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

The idea behind Chung Hung Steel and Sunny Friend Environmental 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.