Correlation Between Sunny Loan and Hunan Investment

Can any of the company-specific risk be diversified away by investing in both Sunny Loan and Hunan Investment 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 Sunny Loan and Hunan Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunny Loan Top and Hunan Investment Group, you can compare the effects of market volatilities on Sunny Loan and Hunan Investment 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 Sunny Loan with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Loan and Hunan Investment.

Diversification Opportunities for Sunny Loan and Hunan Investment

0.73

Correlation Coefficient

Sunny Loan  Hunan Investment

Poor diversification

The 3 months correlation between Sunny and Hunan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Loan Top and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and Sunny Loan 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 Sunny Loan Top are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of Sunny Loan i.e., Sunny Loan and Hunan Investment go up and down completely randomly.

Pair Corralation between Sunny Loan and Hunan Investment

Assuming the 90 days trading horizon Sunny Loan Top is expected to generate 1.31 times more return on investment than Hunan Investment. However, Sunny Loan is 1.31 times more volatile than Hunan Investment Group. It trades about 0.07 of its potential returns per unit of risk. Hunan Investment Group is currently generating about 0.02 per unit of risk. If you would invest  734.00  in Sunny Loan Top on September 13, 2024 and sell it today you would earn a total of  432.00  from holding Sunny Loan Top or generate 58.86% return on investment over 90 days.

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

Sunny Loan Top  vs.  Hunan Investment Group

Sunny Loan Top

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Loan Top are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sunny Loan sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Loan and Hunan Investment

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

The idea behind Sunny Loan Top and Hunan Investment Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.