Correlation Between Industrial and Great Sun

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

By analyzing existing cross correlation between Industrial and Commercial and Great Sun Foods Co, you can compare the effects of market volatilities on Industrial and Great Sun 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 Industrial with a short position of Great Sun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Great Sun.

Diversification Opportunities for Industrial and Great Sun

-0.41

Correlation Coefficient

Industrial  Great Sun

Very good diversification

The 3 months correlation between Industrial and Great is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Great Sun Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Sun Foods and Industrial 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 Industrial and Commercial are associated (or correlated) with Great Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Sun Foods has no effect on the direction of Industrial i.e., Industrial and Great Sun go up and down completely randomly.

Pair Corralation between Industrial and Great Sun

Assuming the 90 days trading horizon Industrial is expected to generate 3.05 times less return on investment than Great Sun. But when comparing it to its historical volatility, Industrial and Commercial is 2.54 times less risky than Great Sun. It trades about 0.07 of its potential returns per unit of risk. Great Sun Foods Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Great Sun Foods Co on October 20, 2024 and sell it today you would earn a total of  129.00  from holding Great Sun Foods Co or generate 39.33% return on investment over 90 days.

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

Industrial and Commercial  vs.  Great Sun Foods Co

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Great Sun Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Sun Foods Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Great Sun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Great Sun

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

The idea behind Industrial and Commercial and Great Sun Foods Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.