Correlation Between Sunmax Biotechnology and Sports Gear

Can any of the company-specific risk be diversified away by investing in both Sunmax Biotechnology and Sports Gear 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 Sunmax Biotechnology and Sports Gear into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sunmax Biotechnology and Sports Gear

0.79

Correlation Coefficient

Sunmax Biotechnology  Sports Gear

Poor diversification

The 3 months correlation between Sunmax and Sports is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sunmax Biotechnology Co and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear and Sunmax Biotechnology 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 Sunmax Biotechnology Co are associated (or correlated) with Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Sunmax Biotechnology i.e., Sunmax Biotechnology and Sports Gear go up and down completely randomly.

Pair Corralation between Sunmax Biotechnology and Sports Gear

Assuming the 90 days trading horizon Sunmax Biotechnology is expected to generate 3.76 times less return on investment than Sports Gear. But when comparing it to its historical volatility, Sunmax Biotechnology Co is 2.93 times less risky than Sports Gear. It trades about 0.09 of its potential returns per unit of risk. Sports Gear Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Sports Gear Co on October 5, 2024 and sell it today you would earn a total of  2,400  from holding Sports Gear Co or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sunmax Biotechnology Co  vs.  Sports Gear Co

Sunmax Biotechnology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunmax Biotechnology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunmax Biotechnology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sports Gear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunmax Biotechnology and Sports Gear

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

The idea behind Sunmax Biotechnology Co and Sports Gear 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.