Correlation Between America Great and Sunny Optical

Can any of the company-specific risk be diversified away by investing in both America Great and Sunny Optical 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 America Great and Sunny Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between America Great Health and Sunny Optical Technology, you can compare the effects of market volatilities on America Great and Sunny Optical 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 America Great with a short position of Sunny Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of America Great and Sunny Optical.

Diversification Opportunities for America Great and Sunny Optical

0.72

Correlation Coefficient

America Great  Sunny Optical

Poor diversification

The 3 months correlation between America and Sunny is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding America Great Health and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology and America Great 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 America Great Health are associated (or correlated) with Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of America Great i.e., America Great and Sunny Optical go up and down completely randomly.

Pair Corralation between America Great and Sunny Optical

Given the investment horizon of 90 days America Great Health is expected to generate 14.9 times more return on investment than Sunny Optical. However, America Great is 14.9 times more volatile than Sunny Optical Technology. It trades about 0.15 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.15 per unit of risk. If you would invest  0.02  in America Great Health on December 21, 2024 and sell it today you would earn a total of  0.03  from holding America Great Health or generate 150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.95%
Values	Daily Returns

America Great Health  vs.  Sunny Optical Technology

America Great Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in America Great Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, America Great demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Sunny Optical Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with America Great and Sunny Optical

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

The idea behind America Great Health and Sunny Optical Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.