Correlation Between Mitake Information and Sunny Friend

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

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

Diversification Opportunities for Mitake Information and Sunny Friend

-0.22

Correlation Coefficient

Mitake Information  Sunny Friend

Very good diversification

The 3 months correlation between Mitake and Sunny is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Mitake Information 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 Mitake Information 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 Mitake Information 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 Mitake Information i.e., Mitake Information and Sunny Friend go up and down completely randomly.

Pair Corralation between Mitake Information and Sunny Friend

Assuming the 90 days trading horizon Mitake Information is expected to generate 0.38 times more return on investment than Sunny Friend. However, Mitake Information is 2.63 times less risky than Sunny Friend. It trades about 0.21 of its potential returns per unit of risk. Sunny Friend Environmental is currently generating about 0.04 per unit of risk. If you would invest  6,320  in Mitake Information on September 14, 2024 and sell it today you would earn a total of  610.00  from holding Mitake Information or generate 9.65% return on investment over 90 days.

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

Mitake Information  vs.  Sunny Friend Environmental

Mitake Information

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitake Information are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mitake Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sunny Friend Environ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Friend Environmental are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sunny Friend is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mitake Information and Sunny Friend

The main advantage of trading using opposite Mitake Information and Sunny Friend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitake Information 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 Mitake Information 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.