Correlation Between Thinking Electronic and Sunonwealth Electric

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

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

Diversification Opportunities for Thinking Electronic and Sunonwealth Electric

-0.08

Correlation Coefficient

Thinking Electronic  Sunonwealth Electric

Good diversification

The 3 months correlation between Thinking and Sunonwealth is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Thinking Electronic Industrial and Sunonwealth Electric Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunonwealth Electric and Thinking Electronic 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 Thinking Electronic Industrial are associated (or correlated) with Sunonwealth Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunonwealth Electric has no effect on the direction of Thinking Electronic i.e., Thinking Electronic and Sunonwealth Electric go up and down completely randomly.

Pair Corralation between Thinking Electronic and Sunonwealth Electric

Assuming the 90 days trading horizon Thinking Electronic Industrial is expected to generate 0.95 times more return on investment than Sunonwealth Electric. However, Thinking Electronic Industrial is 1.05 times less risky than Sunonwealth Electric. It trades about 0.03 of its potential returns per unit of risk. Sunonwealth Electric Machine is currently generating about -0.1 per unit of risk. If you would invest  16,150  in Thinking Electronic Industrial on December 5, 2024 and sell it today you would earn a total of  250.00  from holding Thinking Electronic Industrial or generate 1.55% return on investment over 90 days.

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

Thinking Electronic Industrial  vs.  Sunonwealth Electric Machine

Thinking Electronic

Risk-Adjusted Performance

Weak

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

Sunonwealth Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunonwealth Electric Machine 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 Thinking Electronic and Sunonwealth Electric

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

The idea behind Thinking Electronic Industrial and Sunonwealth Electric Machine 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.