Correlation Between Sunny Friend and Chung Hung

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

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

Diversification Opportunities for Sunny Friend and Chung Hung

0.64

Correlation Coefficient

Sunny Friend  Chung Hung

Poor diversification

The 3 months correlation between Sunny and Chung is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Chung Hung Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hung Steel and Sunny Friend 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 Sunny Friend Environmental are associated (or correlated) with Chung Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hung Steel has no effect on the direction of Sunny Friend i.e., Sunny Friend and Chung Hung go up and down completely randomly.

Pair Corralation between Sunny Friend and Chung Hung

Assuming the 90 days trading horizon Sunny Friend Environmental is expected to generate 0.86 times more return on investment than Chung Hung. However, Sunny Friend Environmental is 1.16 times less risky than Chung Hung. It trades about -0.03 of its potential returns per unit of risk. Chung Hung Steel is currently generating about -0.05 per unit of risk. If you would invest  9,890  in Sunny Friend Environmental on September 14, 2024 and sell it today you would lose (770.00) from holding Sunny Friend Environmental or give up 7.79% of portfolio value over 90 days.

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

Sunny Friend Environmental  vs.  Chung Hung Steel

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.

Chung Hung Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chung Hung 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 Sunny Friend and Chung Hung

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

The idea behind Sunny Friend Environmental and Chung Hung Steel 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.

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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.