Correlation Between Sunny Friend and Power Wind

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

Diversification Opportunities for Sunny Friend and Power Wind

-0.53

Correlation Coefficient

Sunny Friend  Power Wind

Excellent diversification

The 3 months correlation between Sunny and Power is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Power Wind Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Wind Health 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 Power Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Wind Health has no effect on the direction of Sunny Friend i.e., Sunny Friend and Power Wind go up and down completely randomly.

Pair Corralation between Sunny Friend and Power Wind

Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Power Wind. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Friend Environmental is 1.17 times less risky than Power Wind. The stock trades about -0.05 of its potential returns per unit of risk. The Power Wind Health is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,784  in Power Wind Health on September 15, 2024 and sell it today you would lose (434.00) from holding Power Wind Health or give up 3.68% of portfolio value over 90 days.

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

Sunny Friend Environmental  vs.  Power Wind Health

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.

Power Wind Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Wind Health 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 January 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 Power Wind

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

The idea behind Sunny Friend Environmental and Power Wind Health 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.