Correlation Between SUN ART and American States

Can any of the company-specific risk be diversified away by investing in both SUN ART and American States 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 SUN ART and American States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SUN ART RETAIL and American States Water, you can compare the effects of market volatilities on SUN ART and American States 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 SUN ART with a short position of American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN ART and American States.

Diversification Opportunities for SUN ART and American States

0.23

Correlation Coefficient

SUN ART  American States

Modest diversification

The 3 months correlation between SUN and American is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SUN ART RETAIL and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and SUN ART 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 SUN ART RETAIL are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of SUN ART i.e., SUN ART and American States go up and down completely randomly.

Pair Corralation between SUN ART and American States

Assuming the 90 days trading horizon SUN ART RETAIL is expected to under-perform the American States. In addition to that, SUN ART is 2.9 times more volatile than American States Water. It trades about -0.11 of its total potential returns per unit of risk. American States Water is currently generating about -0.05 per unit of volatility. If you would invest  7,383  in American States Water on December 25, 2024 and sell it today you would lose (428.00) from holding American States Water or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

SUN ART RETAIL  vs.  American States Water

SUN ART RETAIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUN ART RETAIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

American States Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days American States Water has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American States is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SUN ART and American States

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

The idea behind SUN ART RETAIL and American States Water 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.