Correlation Between Sunny Loan and Hengli Industrial

Can any of the company-specific risk be diversified away by investing in both Sunny Loan and Hengli Industrial 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 Hengli Industrial 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 Hengli Industrial Development, you can compare the effects of market volatilities on Sunny Loan and Hengli Industrial 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 Hengli Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Loan and Hengli Industrial.

Diversification Opportunities for Sunny Loan and Hengli Industrial

-0.11

Correlation Coefficient

Sunny Loan  Hengli Industrial

Good diversification

The 3 months correlation between Sunny and Hengli is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Loan Top and Hengli Industrial Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Industrial 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 Hengli Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Industrial has no effect on the direction of Sunny Loan i.e., Sunny Loan and Hengli Industrial go up and down completely randomly.

Pair Corralation between Sunny Loan and Hengli Industrial

Assuming the 90 days trading horizon Sunny Loan Top is expected to under-perform the Hengli Industrial. In addition to that, Sunny Loan is 1.25 times more volatile than Hengli Industrial Development. It trades about -0.03 of its total potential returns per unit of risk. Hengli Industrial Development is currently generating about 0.06 per unit of volatility. If you would invest  229.00  in Hengli Industrial Development on October 25, 2024 and sell it today you would earn a total of  12.00  from holding Hengli Industrial Development or generate 5.24% return on investment over 90 days.

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

Sunny Loan Top  vs.  Hengli Industrial Development

Sunny Loan Top

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunny Loan Top has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hengli Industrial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Industrial Development are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Loan and Hengli Industrial

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

The idea behind Sunny Loan Top and Hengli Industrial Development 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.

Check out your portfolio center.

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.