Correlation Between Sunny Optical and Takara Holdings

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

Diversification Opportunities for Sunny Optical and Takara Holdings

0.87

Correlation Coefficient

Sunny Optical  Takara Holdings

Very poor diversification

The 3 months correlation between Sunny and Takara is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Takara Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takara Holdings 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 Takara Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takara Holdings has no effect on the direction of Sunny Optical i.e., Sunny Optical and Takara Holdings go up and down completely randomly.

Pair Corralation between Sunny Optical and Takara Holdings

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 1.35 times more return on investment than Takara Holdings. However, Sunny Optical is 1.35 times more volatile than Takara Holdings. It trades about 0.05 of its potential returns per unit of risk. Takara Holdings is currently generating about 0.01 per unit of risk. If you would invest  807.00  in Sunny Optical Technology on October 9, 2024 and sell it today you would earn a total of  15.00  from holding Sunny Optical Technology or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.12%
Values	Daily Returns

Sunny Optical Technology  vs.  Takara Holdings

Sunny Optical Technology

Risk-Adjusted Performance

11 of 100

Good

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

Takara Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Takara Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Takara Holdings 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 Takara Holdings

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

The idea behind Sunny Optical Technology and Takara 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.