Correlation Between Sun Max and Yuan High

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

By analyzing existing cross correlation between Sun Max Tech and Yuan High Tech Development, you can compare the effects of market volatilities on Sun Max and Yuan High 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 Sun Max with a short position of Yuan High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Max and Yuan High.

Diversification Opportunities for Sun Max and Yuan High

0.56

Correlation Coefficient

Sun Max  Yuan High

Very weak diversification

The 3 months correlation between Sun and Yuan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sun Max Tech and Yuan High Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan High Tech and Sun Max 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 Sun Max Tech are associated (or correlated) with Yuan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan High Tech has no effect on the direction of Sun Max i.e., Sun Max and Yuan High go up and down completely randomly.

Pair Corralation between Sun Max and Yuan High

Assuming the 90 days trading horizon Sun Max is expected to generate 3.94 times less return on investment than Yuan High. But when comparing it to its historical volatility, Sun Max Tech is 1.62 times less risky than Yuan High. It trades about 0.03 of its potential returns per unit of risk. Yuan High Tech Development is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,308  in Yuan High Tech Development on December 3, 2024 and sell it today you would earn a total of  8,792  from holding Yuan High Tech Development or generate 85.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.69%
Values	Daily Returns

Sun Max Tech  vs.  Yuan High Tech Development

Sun Max Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Max Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sun Max is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yuan High Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan High Tech Development are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuan High showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Max and Yuan High

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

The idea behind Sun Max Tech and Yuan High Tech Development 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.