Correlation Between Sunny Optical and CHINA BANK

Can any of the company-specific risk be diversified away by investing in both Sunny Optical and CHINA BANK 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 CHINA BANK 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 CHINA BANK ADR20, you can compare the effects of market volatilities on Sunny Optical and CHINA BANK 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 CHINA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and CHINA BANK.

Diversification Opportunities for Sunny Optical and CHINA BANK

0.33

Correlation Coefficient

Sunny Optical  CHINA BANK

Weak diversification

The 3 months correlation between Sunny and CHINA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and CHINA BANK ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA BANK ADR20 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 CHINA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA BANK ADR20 has no effect on the direction of Sunny Optical i.e., Sunny Optical and CHINA BANK go up and down completely randomly.

Pair Corralation between Sunny Optical and CHINA BANK

Assuming the 90 days horizon Sunny Optical Technology is expected to under-perform the CHINA BANK. In addition to that, Sunny Optical is 1.4 times more volatile than CHINA BANK ADR20. It trades about -0.07 of its total potential returns per unit of risk. CHINA BANK ADR20 is currently generating about 0.04 per unit of volatility. If you would invest  1,492  in CHINA BANK ADR20 on October 27, 2024 and sell it today you would earn a total of  18.00  from holding CHINA BANK ADR20 or generate 1.21% 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.  CHINA BANK ADR20

Sunny Optical Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 14 (%) 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.

CHINA BANK ADR20

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CHINA BANK may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sunny Optical and CHINA BANK

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

The idea behind Sunny Optical Technology and CHINA BANK ADR20 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.