Correlation Between Sunny Optical and HYDROFARM HLD

Can any of the company-specific risk be diversified away by investing in both Sunny Optical and HYDROFARM HLD 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 HYDROFARM HLD 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 HYDROFARM HLD GRP, you can compare the effects of market volatilities on Sunny Optical and HYDROFARM HLD 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 HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and HYDROFARM HLD.

Diversification Opportunities for Sunny Optical and HYDROFARM HLD

0.31

Correlation Coefficient

Sunny Optical  HYDROFARM HLD

Weak diversification

The 3 months correlation between Sunny and HYDROFARM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP 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 HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Sunny Optical i.e., Sunny Optical and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between Sunny Optical and HYDROFARM HLD

Assuming the 90 days horizon Sunny Optical is expected to generate 1.05 times less return on investment than HYDROFARM HLD. But when comparing it to its historical volatility, Sunny Optical Technology is 1.54 times less risky than HYDROFARM HLD. It trades about 0.38 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  55.00  in HYDROFARM HLD GRP on September 5, 2024 and sell it today you would earn a total of  20.00  from holding HYDROFARM HLD GRP or generate 36.36% return on investment over 90 days.

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

Sunny Optical Technology  vs.  HYDROFARM HLD GRP

Sunny Optical Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

HYDROFARM HLD GRP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and HYDROFARM HLD

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

The idea behind Sunny Optical Technology and HYDROFARM HLD GRP 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.