Correlation Between San Fu and Sunfon Construction

Can any of the company-specific risk be diversified away by investing in both San Fu and Sunfon Construction 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 San Fu and Sunfon Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Fu Chemical and Sunfon Construction Co, you can compare the effects of market volatilities on San Fu and Sunfon Construction 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 San Fu with a short position of Sunfon Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fu and Sunfon Construction.

Diversification Opportunities for San Fu and Sunfon Construction

-0.09

Correlation Coefficient

San Fu  Sunfon Construction

Good diversification

The 3 months correlation between San and Sunfon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding San Fu Chemical and Sunfon Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfon Construction and San Fu 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 San Fu Chemical are associated (or correlated) with Sunfon Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfon Construction has no effect on the direction of San Fu i.e., San Fu and Sunfon Construction go up and down completely randomly.

Pair Corralation between San Fu and Sunfon Construction

Assuming the 90 days trading horizon San Fu Chemical is expected to under-perform the Sunfon Construction. In addition to that, San Fu is 1.44 times more volatile than Sunfon Construction Co. It trades about -0.16 of its total potential returns per unit of risk. Sunfon Construction Co is currently generating about 0.03 per unit of volatility. If you would invest  1,965  in Sunfon Construction Co on October 25, 2024 and sell it today you would earn a total of  10.00  from holding Sunfon Construction Co or generate 0.51% return on investment over 90 days.

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

San Fu Chemical  vs.  Sunfon Construction Co

San Fu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Fu Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, San Fu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sunfon Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunfon Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunfon Construction 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 San Fu and Sunfon Construction

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

The idea behind San Fu Chemical and Sunfon Construction 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.