Correlation Between Sunny Optical and NorAm Drilling

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

Diversification Opportunities for Sunny Optical and NorAm Drilling

-0.65

Correlation Coefficient

Sunny Optical  NorAm Drilling

Excellent diversification

The 3 months correlation between Sunny and NorAm is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Sunny Optical i.e., Sunny Optical and NorAm Drilling go up and down completely randomly.

Pair Corralation between Sunny Optical and NorAm Drilling

Assuming the 90 days horizon Sunny Optical Technology is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Optical Technology is 3.22 times less risky than NorAm Drilling. The stock trades about 0.0 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  139.00  in NorAm Drilling AS on October 24, 2024 and sell it today you would earn a total of  188.00  from holding NorAm Drilling AS or generate 135.25% return on investment over 90 days.

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

Sunny Optical Technology  vs.  NorAm Drilling AS

Sunny Optical Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 15 (%) 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.

NorAm Drilling AS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NorAm Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and NorAm Drilling

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

The idea behind Sunny Optical Technology and NorAm Drilling AS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.