Correlation Between Sports Gear and Sunfon Construction

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

By analyzing existing cross correlation between Sports Gear Co and Sunfon Construction Co, you can compare the effects of market volatilities on Sports Gear and Sunfon Construction 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 Sports Gear with a short position of Sunfon Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Sunfon Construction.

Diversification Opportunities for Sports Gear and Sunfon Construction

-0.79

Correlation Coefficient

Sports Gear  Sunfon Construction

Pay attention - limited upside

The 3 months correlation between Sports and Sunfon is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Sunfon Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfon Construction and Sports Gear 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 Sports Gear Co are associated (or correlated) with Sunfon Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfon Construction has no effect on the direction of Sports Gear i.e., Sports Gear and Sunfon Construction go up and down completely randomly.

Pair Corralation between Sports Gear and Sunfon Construction

Assuming the 90 days trading horizon Sports Gear Co is expected to under-perform the Sunfon Construction. In addition to that, Sports Gear is 2.46 times more volatile than Sunfon Construction Co. It trades about -0.4 of its total potential returns per unit of risk. Sunfon Construction Co is currently generating about -0.2 per unit of volatility. If you would invest  2,060  in Sunfon Construction Co on September 25, 2024 and sell it today you would lose (85.00) from holding Sunfon Construction Co or give up 4.13% of portfolio value over 90 days.

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

Sports Gear Co  vs.  Sunfon Construction Co

Sports Gear

Risk-Adjusted Performance

8 of 100

OK

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

Sunfon Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunfon Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sports Gear and Sunfon Construction

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

The idea behind Sports Gear Co and Sunfon Construction 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.