Correlation Between Sunspring Metal and Chun Yuan

Can any of the company-specific risk be diversified away by investing in both Sunspring Metal and Chun Yuan 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 Chun Yuan 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 Chun Yuan Steel, you can compare the effects of market volatilities on Sunspring Metal and Chun Yuan 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 Chun Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunspring Metal and Chun Yuan.

Diversification Opportunities for Sunspring Metal and Chun Yuan

0.1

Correlation Coefficient

Sunspring Metal  Chun Yuan

Average diversification

The 3 months correlation between Sunspring and Chun is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sunspring Metal Corp and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel 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 Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Sunspring Metal i.e., Sunspring Metal and Chun Yuan go up and down completely randomly.

Pair Corralation between Sunspring Metal and Chun Yuan

Assuming the 90 days trading horizon Sunspring Metal Corp is expected to under-perform the Chun Yuan. In addition to that, Sunspring Metal is 1.57 times more volatile than Chun Yuan Steel. It trades about -0.05 of its total potential returns per unit of risk. Chun Yuan Steel is currently generating about 0.19 per unit of volatility. If you would invest  1,805  in Chun Yuan Steel on December 30, 2024 and sell it today you would earn a total of  255.00  from holding Chun Yuan Steel or generate 14.13% return on investment over 90 days.

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

Sunspring Metal Corp  vs.  Chun Yuan Steel

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.

Chun Yuan Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chun Yuan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunspring Metal and Chun Yuan

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

The idea behind Sunspring Metal Corp and Chun Yuan Steel 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.