Correlation Between Sun Sea and GenMont Biotech

Can any of the company-specific risk be diversified away by investing in both Sun Sea and GenMont Biotech 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 Sun Sea and GenMont Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sun Sea and GenMont Biotech

0.23

Correlation Coefficient

Sun Sea  GenMont Biotech

Modest diversification

The 3 months correlation between Sun and GenMont is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sun Sea Construction and GenMont Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GenMont Biotech and Sun Sea 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 Sun Sea Construction are associated (or correlated) with GenMont Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GenMont Biotech has no effect on the direction of Sun Sea i.e., Sun Sea and GenMont Biotech go up and down completely randomly.

Pair Corralation between Sun Sea and GenMont Biotech

Assuming the 90 days trading horizon Sun Sea Construction is expected to generate 2.09 times more return on investment than GenMont Biotech. However, Sun Sea is 2.09 times more volatile than GenMont Biotech. It trades about 0.01 of its potential returns per unit of risk. GenMont Biotech is currently generating about -0.02 per unit of risk. If you would invest  2,000  in Sun Sea Construction on October 4, 2024 and sell it today you would lose (90.00) from holding Sun Sea Construction or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Sun Sea Construction  vs.  GenMont Biotech

Sun Sea Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

GenMont Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GenMont Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sun Sea and GenMont Biotech

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

The idea behind Sun Sea Construction and GenMont Biotech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.