Correlation Between China Development and Sunfar Computer

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

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

Diversification Opportunities for China Development and Sunfar Computer

0.03

Correlation Coefficient

China Development  Sunfar Computer

Significant diversification

The 3 months correlation between China and Sunfar is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Sunfar Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfar Computer and China Development 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 China Development Financial are associated (or correlated) with Sunfar Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfar Computer has no effect on the direction of China Development i.e., China Development and Sunfar Computer go up and down completely randomly.

Pair Corralation between China Development and Sunfar Computer

Assuming the 90 days trading horizon China Development Financial is expected to under-perform the Sunfar Computer. In addition to that, China Development is 1.21 times more volatile than Sunfar Computer Co. It trades about -0.07 of its total potential returns per unit of risk. Sunfar Computer Co is currently generating about -0.04 per unit of volatility. If you would invest  1,595  in Sunfar Computer Co on October 26, 2024 and sell it today you would lose (15.00) from holding Sunfar Computer Co or give up 0.94% of portfolio value over 90 days.

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

China Development Financial  vs.  Sunfar Computer Co

China Development

Risk-Adjusted Performance

2 of 100

Weak

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

Sunfar Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunfar Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunfar Computer 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 China Development and Sunfar Computer

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

The idea behind China Development Financial and Sunfar Computer 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.