Correlation Between Great Sun and Sinomach General

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

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

Diversification Opportunities for Great Sun and Sinomach General

0.7

Correlation Coefficient

Great Sun  Sinomach General

Poor diversification

The 3 months correlation between Great and Sinomach is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Great Sun Foods Co and Sinomach General Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomach General Mac and Great Sun 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 Great Sun Foods Co are associated (or correlated) with Sinomach General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomach General Mac has no effect on the direction of Great Sun i.e., Great Sun and Sinomach General go up and down completely randomly.

Pair Corralation between Great Sun and Sinomach General

Assuming the 90 days trading horizon Great Sun Foods Co is expected to generate 1.85 times more return on investment than Sinomach General. However, Great Sun is 1.85 times more volatile than Sinomach General Machinery. It trades about 0.07 of its potential returns per unit of risk. Sinomach General Machinery is currently generating about 0.12 per unit of risk. If you would invest  436.00  in Great Sun Foods Co on December 26, 2024 and sell it today you would earn a total of  43.00  from holding Great Sun Foods Co or generate 9.86% return on investment over 90 days.

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

Great Sun Foods Co  vs.  Sinomach General Machinery

Great Sun Foods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Sun Foods Co are ranked lower than 5 (%) 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.

Sinomach General Mac

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinomach General Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinomach General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Sun and Sinomach General

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

The idea behind Great Sun Foods Co and Sinomach General Machinery 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.