Correlation Between Sunfon Construction and Sunmax Biotechnology

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

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

Diversification Opportunities for Sunfon Construction and Sunmax Biotechnology

-0.61

Correlation Coefficient

Sunfon Construction  Sunmax Biotechnology

Excellent diversification

The 3 months correlation between Sunfon and Sunmax is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sunfon Construction Co and Sunmax Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunmax Biotechnology and Sunfon Construction 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 Sunfon Construction Co are associated (or correlated) with Sunmax Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunmax Biotechnology has no effect on the direction of Sunfon Construction i.e., Sunfon Construction and Sunmax Biotechnology go up and down completely randomly.

Pair Corralation between Sunfon Construction and Sunmax Biotechnology

Assuming the 90 days trading horizon Sunfon Construction is expected to generate 5.44 times less return on investment than Sunmax Biotechnology. But when comparing it to its historical volatility, Sunfon Construction Co is 1.48 times less risky than Sunmax Biotechnology. It trades about 0.02 of its potential returns per unit of risk. Sunmax Biotechnology Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,446  in Sunmax Biotechnology Co on October 23, 2024 and sell it today you would earn a total of  14,854  from holding Sunmax Biotechnology Co or generate 119.35% return on investment over 90 days.

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

Sunfon Construction Co  vs.  Sunmax Biotechnology Co

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.

Sunmax Biotechnology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunmax Biotechnology Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sunmax Biotechnology is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sunfon Construction and Sunmax Biotechnology

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

The idea behind Sunfon Construction Co and Sunmax Biotechnology 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.