Correlation Between Channel Well and Sonix Technology

Can any of the company-specific risk be diversified away by investing in both Channel Well and Sonix Technology 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 Channel Well and Sonix Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Channel Well Technology and Sonix Technology Co, you can compare the effects of market volatilities on Channel Well and Sonix Technology 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 Channel Well with a short position of Sonix Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Channel Well and Sonix Technology.

Diversification Opportunities for Channel Well and Sonix Technology

0.32

Correlation Coefficient

Channel Well  Sonix Technology

Weak diversification

The 3 months correlation between Channel and Sonix is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Channel Well Technology and Sonix Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonix Technology and Channel Well 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 Channel Well Technology are associated (or correlated) with Sonix Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonix Technology has no effect on the direction of Channel Well i.e., Channel Well and Sonix Technology go up and down completely randomly.

Pair Corralation between Channel Well and Sonix Technology

Assuming the 90 days trading horizon Channel Well Technology is expected to generate 1.58 times more return on investment than Sonix Technology. However, Channel Well is 1.58 times more volatile than Sonix Technology Co. It trades about 0.17 of its potential returns per unit of risk. Sonix Technology Co is currently generating about 0.02 per unit of risk. If you would invest  6,960  in Channel Well Technology on December 24, 2024 and sell it today you would earn a total of  1,800  from holding Channel Well Technology or generate 25.86% return on investment over 90 days.

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

Channel Well Technology  vs.  Sonix Technology Co

Channel Well Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Channel Well Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Channel Well showed solid returns over the last few months and may actually be approaching a breakup point.

Sonix Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sonix Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sonix Technology 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 Channel Well and Sonix Technology

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

The idea behind Channel Well Technology and Sonix Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.