Correlation Between Spire Healthcare and Sunny Optical

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

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

Diversification Opportunities for Spire Healthcare and Sunny Optical

0.15

Correlation Coefficient

Spire Healthcare  Sunny Optical

Average diversification

The 3 months correlation between Spire and Sunny is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group 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 Spire Healthcare 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 Spire Healthcare Group 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 Spire Healthcare i.e., Spire Healthcare and Sunny Optical go up and down completely randomly.

Pair Corralation between Spire Healthcare and Sunny Optical

Assuming the 90 days trading horizon Spire Healthcare is expected to generate 12.5 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, Spire Healthcare Group is 3.4 times less risky than Sunny Optical. It trades about 0.04 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,505  in Sunny Optical Technology on December 3, 2024 and sell it today you would earn a total of  2,115  from holding Sunny Optical Technology or generate 32.51% return on investment over 90 days.

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

Spire Healthcare Group  vs.  Sunny Optical Technology

Spire Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Healthcare Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Spire Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of comparatively uncertain basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spire Healthcare and Sunny Optical

The main advantage of trading using opposite Spire Healthcare and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire Healthcare 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 Spire Healthcare Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.