Correlation Between Golden Friends and Sunonwealth Electric

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

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

Diversification Opportunities for Golden Friends and Sunonwealth Electric

0.26

Correlation Coefficient

Golden Friends  Sunonwealth Electric

Modest diversification

The 3 months correlation between Golden and Sunonwealth is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Golden Friends and Sunonwealth Electric Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunonwealth Electric and Golden Friends 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 Golden Friends 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 Golden Friends i.e., Golden Friends and Sunonwealth Electric go up and down completely randomly.

Pair Corralation between Golden Friends and Sunonwealth Electric

Assuming the 90 days trading horizon Golden Friends is expected to generate 1.64 times less return on investment than Sunonwealth Electric. But when comparing it to its historical volatility, Golden Friends is 2.52 times less risky than Sunonwealth Electric. It trades about 0.09 of its potential returns per unit of risk. Sunonwealth Electric Machine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,810  in Sunonwealth Electric Machine on December 26, 2024 and sell it today you would earn a total of  540.00  from holding Sunonwealth Electric Machine or generate 5.5% return on investment over 90 days.

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

Golden Friends  vs.  Sunonwealth Electric Machine

Golden Friends

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Friends are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Golden Friends 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

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.

Pair Trading with Golden Friends and Sunonwealth Electric

The main advantage of trading using opposite Golden Friends and Sunonwealth Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Friends 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 Golden Friends 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.

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.