Correlation Between Sunny Friend and Evergreen Steel

Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Evergreen Steel 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 Evergreen Steel 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 Evergreen Steel Corp, you can compare the effects of market volatilities on Sunny Friend and Evergreen Steel 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 Evergreen Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Evergreen Steel.

Diversification Opportunities for Sunny Friend and Evergreen Steel

-0.4

Correlation Coefficient

Sunny Friend  Evergreen Steel

Very good diversification

The 3 months correlation between Sunny and Evergreen is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Evergreen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Steel Corp 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 Evergreen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Steel Corp has no effect on the direction of Sunny Friend i.e., Sunny Friend and Evergreen Steel go up and down completely randomly.

Pair Corralation between Sunny Friend and Evergreen Steel

Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Evergreen Steel. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Friend Environmental is 1.14 times less risky than Evergreen Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Evergreen Steel Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  10,300  in Evergreen Steel Corp on September 19, 2024 and sell it today you would earn a total of  650.00  from holding Evergreen Steel Corp or generate 6.31% return on investment over 90 days.

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

Sunny Friend Environmental  vs.  Evergreen Steel Corp

Sunny Friend Environ

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Friend Environmental are ranked lower than 2 (%) 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.

Evergreen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evergreen Steel Corp 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 Sunny Friend and Evergreen Steel

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

The idea behind Sunny Friend Environmental and Evergreen Steel Corp 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 Valuation module to check real value of public entities based on technical and fundamental data.