Correlation Between GOODYEAR T and Sunny Optical

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

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

Diversification Opportunities for GOODYEAR T and Sunny Optical

0.62

Correlation Coefficient

GOODYEAR T  Sunny Optical

Poor diversification

The 3 months correlation between GOODYEAR and Sunny is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER 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 GOODYEAR T 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 GOODYEAR T RUBBER 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 GOODYEAR T i.e., GOODYEAR T and Sunny Optical go up and down completely randomly.

Pair Corralation between GOODYEAR T and Sunny Optical

Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to under-perform the Sunny Optical. But the stock apears to be less risky and, when comparing its historical volatility, GOODYEAR T RUBBER is 1.26 times less risky than Sunny Optical. The stock trades about 0.0 of its potential returns per unit of risk. The Sunny Optical Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Sunny Optical Technology on October 2, 2024 and sell it today you would lose (153.00) from holding Sunny Optical Technology or give up 15.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

GOODYEAR T RUBBER  vs.  Sunny Optical Technology

GOODYEAR T RUBBER

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sunny Optical Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GOODYEAR T and Sunny Optical

The main advantage of trading using opposite GOODYEAR T and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T 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 GOODYEAR T RUBBER 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.