Correlation Between Sunny Optical and Isetan Mitsukoshi

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

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

Diversification Opportunities for Sunny Optical and Isetan Mitsukoshi

0.52

Correlation Coefficient

Sunny Optical  Isetan Mitsukoshi

Very weak diversification

The 3 months correlation between Sunny and Isetan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Isetan Mitsukoshi Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isetan Mitsukoshi and Sunny Optical 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 Sunny Optical Technology are associated (or correlated) with Isetan Mitsukoshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isetan Mitsukoshi has no effect on the direction of Sunny Optical i.e., Sunny Optical and Isetan Mitsukoshi go up and down completely randomly.

Pair Corralation between Sunny Optical and Isetan Mitsukoshi

Assuming the 90 days horizon Sunny Optical is expected to generate 4.13 times less return on investment than Isetan Mitsukoshi. In addition to that, Sunny Optical is 1.03 times more volatile than Isetan Mitsukoshi Holdings. It trades about 0.06 of its total potential returns per unit of risk. Isetan Mitsukoshi Holdings is currently generating about 0.27 per unit of volatility. If you would invest  1,480  in Isetan Mitsukoshi Holdings on October 5, 2024 and sell it today you would earn a total of  230.00  from holding Isetan Mitsukoshi Holdings or generate 15.54% return on investment over 90 days.

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

Sunny Optical Technology  vs.  Isetan Mitsukoshi Holdings

Sunny Optical Technology

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Sunny Optical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Isetan Mitsukoshi

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Isetan Mitsukoshi Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Isetan Mitsukoshi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and Isetan Mitsukoshi

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

The idea behind Sunny Optical Technology and Isetan Mitsukoshi Holdings 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.