Correlation Between Sunonwealth Electric and Rechi Precision

Can any of the company-specific risk be diversified away by investing in both Sunonwealth Electric and Rechi Precision 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 Sunonwealth Electric and Rechi Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunonwealth Electric Machine and Rechi Precision Co, you can compare the effects of market volatilities on Sunonwealth Electric and Rechi Precision 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 Sunonwealth Electric with a short position of Rechi Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunonwealth Electric and Rechi Precision.

Diversification Opportunities for Sunonwealth Electric and Rechi Precision

0.41

Correlation Coefficient

Sunonwealth Electric  Rechi Precision

Very weak diversification

The 3 months correlation between Sunonwealth and Rechi is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sunonwealth Electric Machine and Rechi Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rechi Precision and Sunonwealth Electric 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 Sunonwealth Electric Machine are associated (or correlated) with Rechi Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rechi Precision has no effect on the direction of Sunonwealth Electric i.e., Sunonwealth Electric and Rechi Precision go up and down completely randomly.

Pair Corralation between Sunonwealth Electric and Rechi Precision

Assuming the 90 days trading horizon Sunonwealth Electric is expected to generate 3.32 times less return on investment than Rechi Precision. In addition to that, Sunonwealth Electric is 1.44 times more volatile than Rechi Precision Co. It trades about 0.06 of its total potential returns per unit of risk. Rechi Precision Co is currently generating about 0.27 per unit of volatility. If you would invest  2,530  in Rechi Precision Co on December 25, 2024 and sell it today you would earn a total of  605.00  from holding Rechi Precision Co or generate 23.91% return on investment over 90 days.

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

Sunonwealth Electric Machine  vs.  Rechi Precision Co

Sunonwealth Electric

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunonwealth Electric Machine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunonwealth Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Rechi Precision

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rechi Precision Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rechi Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunonwealth Electric and Rechi Precision

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

The idea behind Sunonwealth Electric Machine and Rechi Precision 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.