Correlation Between Sun Sea and U Media

Can any of the company-specific risk be diversified away by investing in both Sun Sea and U Media 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 U Media 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 U Media Communications, you can compare the effects of market volatilities on Sun Sea and U Media 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 U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Sea and U Media.

Diversification Opportunities for Sun Sea and U Media

0.25

Correlation Coefficient

Sun Sea  U Media

Modest diversification

The 3 months correlation between Sun and 6470 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sun Sea Construction and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications 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 U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Sun Sea i.e., Sun Sea and U Media go up and down completely randomly.

Pair Corralation between Sun Sea and U Media

Assuming the 90 days trading horizon Sun Sea is expected to generate 2.8 times less return on investment than U Media. In addition to that, Sun Sea is 1.01 times more volatile than U Media Communications. It trades about 0.01 of its total potential returns per unit of risk. U Media Communications is currently generating about 0.02 per unit of volatility. If you would invest  4,923  in U Media Communications on October 4, 2024 and sell it today you would earn a total of  467.00  from holding U Media Communications or generate 9.49% return on investment over 90 days.

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

Sun Sea Construction  vs.  U Media Communications

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.

U Media Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Media 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 Sun Sea and U Media

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

The idea behind Sun Sea Construction and U Media Communications 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.