Correlation Between Great Sun and Chahua Modern

Can any of the company-specific risk be diversified away by investing in both Great Sun and Chahua Modern 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 Chahua Modern 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 Chahua Modern Housewares, you can compare the effects of market volatilities on Great Sun and Chahua Modern 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 Chahua Modern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Sun and Chahua Modern.

Diversification Opportunities for Great Sun and Chahua Modern

-0.32

Correlation Coefficient

Great Sun  Chahua Modern

Very good diversification

The 3 months correlation between Great and Chahua is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Great Sun Foods Co and Chahua Modern Housewares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chahua Modern Housewares 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 Chahua Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chahua Modern Housewares has no effect on the direction of Great Sun i.e., Great Sun and Chahua Modern go up and down completely randomly.

Pair Corralation between Great Sun and Chahua Modern

Assuming the 90 days trading horizon Great Sun Foods Co is expected to under-perform the Chahua Modern. But the stock apears to be less risky and, when comparing its historical volatility, Great Sun Foods Co is 1.01 times less risky than Chahua Modern. The stock trades about 0.0 of its potential returns per unit of risk. The Chahua Modern Housewares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,006  in Chahua Modern Housewares on October 25, 2024 and sell it today you would earn a total of  56.00  from holding Chahua Modern Housewares or generate 2.79% return on investment over 90 days.

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

Great Sun Foods Co  vs.  Chahua Modern Housewares

Great Sun Foods

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Great Sun Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Great Sun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chahua Modern Housewares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Great Sun and Chahua Modern

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

The idea behind Great Sun Foods Co and Chahua Modern Housewares 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.