Correlation Between Sunny Loan and DO Home

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

Diversification Opportunities for Sunny Loan and DO Home

0.38

Correlation Coefficient

Sunny Loan  DO Home

Weak diversification

The 3 months correlation between Sunny and 002798 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Loan Top and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection 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 DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of Sunny Loan i.e., Sunny Loan and DO Home go up and down completely randomly.

Pair Corralation between Sunny Loan and DO Home

Assuming the 90 days trading horizon Sunny Loan Top is expected to under-perform the DO Home. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Loan Top is 1.01 times less risky than DO Home. The stock trades about -0.09 of its potential returns per unit of risk. The DO Home Collection is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  412.00  in DO Home Collection on October 8, 2024 and sell it today you would lose (65.00) from holding DO Home Collection or give up 15.78% of portfolio value over 90 days.

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

Sunny Loan Top  vs.  DO Home Collection

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.

DO Home Collection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DO Home Collection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sunny Loan and DO Home

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

The idea behind Sunny Loan Top and DO Home Collection 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.