Correlation Between Solution Advanced and Sungmoon Electronics

Can any of the company-specific risk be diversified away by investing in both Solution Advanced and Sungmoon Electronics 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 Solution Advanced and Sungmoon Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Solution Advanced and Sungmoon Electronics

0.11

Correlation Coefficient

Solution Advanced  Sungmoon Electronics

Average diversification

The 3 months correlation between Solution and Sungmoon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Sungmoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungmoon Electronics and Solution Advanced 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 Solution Advanced Technology are associated (or correlated) with Sungmoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungmoon Electronics has no effect on the direction of Solution Advanced i.e., Solution Advanced and Sungmoon Electronics go up and down completely randomly.

Pair Corralation between Solution Advanced and Sungmoon Electronics

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 1.68 times more return on investment than Sungmoon Electronics. However, Solution Advanced is 1.68 times more volatile than Sungmoon Electronics Co. It trades about 0.13 of its potential returns per unit of risk. Sungmoon Electronics Co is currently generating about 0.06 per unit of risk. If you would invest  152,600  in Solution Advanced Technology on December 2, 2024 and sell it today you would earn a total of  72,400  from holding Solution Advanced Technology or generate 47.44% return on investment over 90 days.

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

Solution Advanced Technology  vs.  Sungmoon Electronics Co

Solution Advanced

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Advanced Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solution Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Sungmoon Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sungmoon Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sungmoon Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solution Advanced and Sungmoon Electronics

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

The idea behind Solution Advanced Technology and Sungmoon Electronics 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.