Correlation Between Sunny Friend and Tradetool Auto

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

Diversification Opportunities for Sunny Friend and Tradetool Auto

0.87

Correlation Coefficient

Sunny Friend  Tradetool Auto

Very poor diversification

The 3 months correlation between Sunny and Tradetool is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Tradetool Auto Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradetool Auto 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 Tradetool Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradetool Auto has no effect on the direction of Sunny Friend i.e., Sunny Friend and Tradetool Auto go up and down completely randomly.

Pair Corralation between Sunny Friend and Tradetool Auto

Assuming the 90 days trading horizon Sunny Friend Environmental is expected to generate 0.76 times more return on investment than Tradetool Auto. However, Sunny Friend Environmental is 1.32 times less risky than Tradetool Auto. It trades about -0.06 of its potential returns per unit of risk. Tradetool Auto Co is currently generating about -0.08 per unit of risk. If you would invest  10,450  in Sunny Friend Environmental on October 22, 2024 and sell it today you would lose (2,160) from holding Sunny Friend Environmental or give up 20.67% of portfolio value over 90 days.

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

Sunny Friend Environmental  vs.  Tradetool Auto Co

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.

Tradetool Auto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradetool Auto Co 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 Sunny Friend and Tradetool Auto

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

The idea behind Sunny Friend Environmental and Tradetool Auto 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.