Correlation Between Fusheng Precision and Sunny Friend

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

By analyzing existing cross correlation between Fusheng Precision Co and Sunny Friend Environmental, you can compare the effects of market volatilities on Fusheng Precision and Sunny Friend 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 Fusheng Precision with a short position of Sunny Friend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fusheng Precision and Sunny Friend.

Diversification Opportunities for Fusheng Precision and Sunny Friend

-0.72

Correlation Coefficient

Fusheng Precision  Sunny Friend

Pay attention - limited upside

The 3 months correlation between Fusheng and Sunny is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fusheng Precision Co and Sunny Friend Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Friend Environ and Fusheng Precision 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 Fusheng Precision Co are associated (or correlated) with Sunny Friend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Friend Environ has no effect on the direction of Fusheng Precision i.e., Fusheng Precision and Sunny Friend go up and down completely randomly.

Pair Corralation between Fusheng Precision and Sunny Friend

Assuming the 90 days trading horizon Fusheng Precision Co is expected to generate 1.26 times more return on investment than Sunny Friend. However, Fusheng Precision is 1.26 times more volatile than Sunny Friend Environmental. It trades about 0.11 of its potential returns per unit of risk. Sunny Friend Environmental is currently generating about -0.2 per unit of risk. If you would invest  29,300  in Fusheng Precision Co on October 24, 2024 and sell it today you would earn a total of  3,350  from holding Fusheng Precision Co or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Fusheng Precision Co  vs.  Sunny Friend Environmental

Fusheng Precision

Risk-Adjusted Performance

8 of 100

OK

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

Sunny Friend Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunny Friend Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fusheng Precision and Sunny Friend

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

The idea behind Fusheng Precision Co and Sunny Friend Environmental 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.