Correlation Between ITM Power and Sunny Optical

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

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

Diversification Opportunities for ITM Power and Sunny Optical

-0.6

Correlation Coefficient

ITM Power  Sunny Optical

Excellent diversification

The 3 months correlation between ITM and Sunny is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc 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 ITM Power 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 ITM Power Plc 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 ITM Power i.e., ITM Power and Sunny Optical go up and down completely randomly.

Pair Corralation between ITM Power and Sunny Optical

Assuming the 90 days horizon ITM Power is expected to generate 18.02 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, ITM Power Plc is 1.31 times less risky than Sunny Optical. It trades about 0.01 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  753.00  in Sunny Optical Technology on October 7, 2024 and sell it today you would earn a total of  69.00  from holding Sunny Optical Technology or generate 9.16% return on investment over 90 days.

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

ITM Power Plc  vs.  Sunny Optical Technology

ITM Power Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITM Power Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sunny Optical Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 5 (%) 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 ITM Power and Sunny Optical

The main advantage of trading using opposite ITM Power and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power 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 ITM Power Plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.