Correlation Between Thye Ming and Sunspring Metal

Can any of the company-specific risk be diversified away by investing in both Thye Ming and Sunspring Metal 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 Thye Ming and Sunspring Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thye Ming Industrial and Sunspring Metal Corp, you can compare the effects of market volatilities on Thye Ming and Sunspring Metal 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 Thye Ming with a short position of Sunspring Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thye Ming and Sunspring Metal.

Diversification Opportunities for Thye Ming and Sunspring Metal

0.09

Correlation Coefficient

Thye Ming  Sunspring Metal

Significant diversification

The 3 months correlation between Thye and Sunspring is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Thye Ming Industrial and Sunspring Metal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunspring Metal Corp and Thye Ming 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 Thye Ming Industrial are associated (or correlated) with Sunspring Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunspring Metal Corp has no effect on the direction of Thye Ming i.e., Thye Ming and Sunspring Metal go up and down completely randomly.

Pair Corralation between Thye Ming and Sunspring Metal

Assuming the 90 days trading horizon Thye Ming Industrial is expected to generate 0.39 times more return on investment than Sunspring Metal. However, Thye Ming Industrial is 2.54 times less risky than Sunspring Metal. It trades about 0.41 of its potential returns per unit of risk. Sunspring Metal Corp is currently generating about -0.04 per unit of risk. If you would invest  6,300  in Thye Ming Industrial on December 22, 2024 and sell it today you would earn a total of  1,230  from holding Thye Ming Industrial or generate 19.52% return on investment over 90 days.

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

Thye Ming Industrial  vs.  Sunspring Metal Corp

Thye Ming Industrial

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thye Ming Industrial are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Thye Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Sunspring Metal Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunspring Metal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunspring Metal is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Thye Ming and Sunspring Metal

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

The idea behind Thye Ming Industrial and Sunspring Metal 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.