Correlation Between Sunfun Info and Nankang Rubber

Can any of the company-specific risk be diversified away by investing in both Sunfun Info and Nankang Rubber 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 Sunfun Info and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunfun Info Co and Nankang Rubber Tire, you can compare the effects of market volatilities on Sunfun Info and Nankang Rubber 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 Sunfun Info with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunfun Info and Nankang Rubber.

Diversification Opportunities for Sunfun Info and Nankang Rubber

0.02

Correlation Coefficient

Sunfun Info  Nankang Rubber

Significant diversification

The 3 months correlation between Sunfun and Nankang is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sunfun Info Co and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Sunfun Info 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 Sunfun Info Co are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Sunfun Info i.e., Sunfun Info and Nankang Rubber go up and down completely randomly.

Pair Corralation between Sunfun Info and Nankang Rubber

Assuming the 90 days trading horizon Sunfun Info Co is expected to under-perform the Nankang Rubber. In addition to that, Sunfun Info is 3.03 times more volatile than Nankang Rubber Tire. It trades about -0.1 of its total potential returns per unit of risk. Nankang Rubber Tire is currently generating about -0.23 per unit of volatility. If you would invest  4,670  in Nankang Rubber Tire on October 22, 2024 and sell it today you would lose (240.00) from holding Nankang Rubber Tire or give up 5.14% of portfolio value over 90 days.

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

Sunfun Info Co  vs.  Nankang Rubber Tire

Sunfun Info

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunfun Info Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunfun Info showed solid returns over the last few months and may actually be approaching a breakup point.

Nankang Rubber Tire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nankang Rubber Tire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nankang Rubber 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 Sunfun Info and Nankang Rubber

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

The idea behind Sunfun Info Co and Nankang Rubber Tire 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.