Correlation Between Sunny Friend and Taiwan Taomee

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

Diversification Opportunities for Sunny Friend and Taiwan Taomee

-0.13

Correlation Coefficient

Sunny Friend  Taiwan Taomee

Good diversification

The 3 months correlation between Sunny and Taiwan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Taiwan Taomee Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taomee 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 Taiwan Taomee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taomee has no effect on the direction of Sunny Friend i.e., Sunny Friend and Taiwan Taomee go up and down completely randomly.

Pair Corralation between Sunny Friend and Taiwan Taomee

Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Taiwan Taomee. In addition to that, Sunny Friend is 1.13 times more volatile than Taiwan Taomee Co. It trades about -0.17 of its total potential returns per unit of risk. Taiwan Taomee Co is currently generating about 0.02 per unit of volatility. If you would invest  1,060  in Taiwan Taomee Co on October 6, 2024 and sell it today you would earn a total of  10.00  from holding Taiwan Taomee Co or generate 0.94% return on investment over 90 days.

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

Sunny Friend Environmental  vs.  Taiwan Taomee 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 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.

Taiwan Taomee

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Taomee Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Taomee may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sunny Friend and Taiwan Taomee

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

The idea behind Sunny Friend Environmental and Taiwan Taomee 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.