Correlation Between Sui and EXM

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

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

Diversification Opportunities for Sui and EXM

0.32

Correlation Coefficient

Sui  EXM

Weak diversification

The 3 months correlation between Sui and EXM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sui and EXM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXM and Sui 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 Sui are associated (or correlated) with EXM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXM has no effect on the direction of Sui i.e., Sui and EXM go up and down completely randomly.

Pair Corralation between Sui and EXM

Assuming the 90 days trading horizon Sui is expected to generate 2.96 times more return on investment than EXM. However, Sui is 2.96 times more volatile than EXM. It trades about 0.32 of its potential returns per unit of risk. EXM is currently generating about 0.06 per unit of risk. If you would invest  103.00  in Sui on September 12, 2024 and sell it today you would earn a total of  268.00  from holding Sui or generate 260.19% return on investment over 90 days.

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

Sui  vs.  EXM

Sui

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sui are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Sui exhibited solid returns over the last few months and may actually be approaching a breakup point.

EXM

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EXM are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, EXM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sui and EXM

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

The idea behind Sui and EXM 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.