Correlation Between Sunny Optical and Sumitomo Mitsui

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

Diversification Opportunities for Sunny Optical and Sumitomo Mitsui

0.7

Correlation Coefficient

Sunny Optical  Sumitomo Mitsui

Poor diversification

The 3 months correlation between Sunny and Sumitomo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of Sunny Optical i.e., Sunny Optical and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Sunny Optical and Sumitomo Mitsui

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 1.86 times more return on investment than Sumitomo Mitsui. However, Sunny Optical is 1.86 times more volatile than Sumitomo Mitsui Construction. It trades about 0.1 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.03 per unit of risk. If you would invest  833.00  in Sunny Optical Technology on December 22, 2024 and sell it today you would earn a total of  175.00  from holding Sunny Optical Technology or generate 21.01% return on investment over 90 days.

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

Sunny Optical Technology  vs.  Sumitomo Mitsui Construction

Sunny Optical Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 8 (%) 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.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sunny Optical and Sumitomo Mitsui

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

The idea behind Sunny Optical Technology and Sumitomo Mitsui Construction 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.