Correlation Between Sunny Loan and China Asset

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

Diversification Opportunities for Sunny Loan and China Asset

-0.03

Correlation Coefficient

Sunny Loan  China Asset

Good diversification

The 3 months correlation between Sunny and China is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Loan Top and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management 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 China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Sunny Loan i.e., Sunny Loan and China Asset go up and down completely randomly.

Pair Corralation between Sunny Loan and China Asset

Assuming the 90 days trading horizon Sunny Loan Top is expected to under-perform the China Asset. In addition to that, Sunny Loan is 3.2 times more volatile than China Asset Management. It trades about -0.22 of its total potential returns per unit of risk. China Asset Management is currently generating about 0.41 per unit of volatility. If you would invest  324.00  in China Asset Management on October 10, 2024 and sell it today you would earn a total of  41.00  from holding China Asset Management or generate 12.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sunny Loan Top  vs.  China Asset Management

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 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.

China Asset Management

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Loan and China Asset

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

The idea behind Sunny Loan Top and China Asset Management 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.