Correlation Between Sunspring Metal and China Glaze

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

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

Diversification Opportunities for Sunspring Metal and China Glaze

-0.53

Correlation Coefficient

Sunspring Metal  China Glaze

Excellent diversification

The 3 months correlation between Sunspring and China is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sunspring Metal Corp and China Glaze Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Glaze and Sunspring Metal 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 Sunspring Metal Corp are associated (or correlated) with China Glaze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Glaze has no effect on the direction of Sunspring Metal i.e., Sunspring Metal and China Glaze go up and down completely randomly.

Pair Corralation between Sunspring Metal and China Glaze

Assuming the 90 days trading horizon Sunspring Metal Corp is expected to generate 1.11 times more return on investment than China Glaze. However, Sunspring Metal is 1.11 times more volatile than China Glaze Co. It trades about -0.05 of its potential returns per unit of risk. China Glaze Co is currently generating about -0.07 per unit of risk. If you would invest  3,285  in Sunspring Metal Corp on December 29, 2024 and sell it today you would lose (220.00) from holding Sunspring Metal Corp or give up 6.7% of portfolio value over 90 days.

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

Sunspring Metal Corp  vs.  China Glaze Co

Sunspring Metal Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunspring Metal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

China Glaze

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Glaze Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sunspring Metal and China Glaze

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

The idea behind Sunspring Metal Corp and China Glaze 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.