Correlation Between Sunny Optical and UMWELTBANK

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

Diversification Opportunities for Sunny Optical and UMWELTBANK

0.48

Correlation Coefficient

Sunny Optical  UMWELTBANK

Very weak diversification

The 3 months correlation between Sunny and UMWELTBANK is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of Sunny Optical i.e., Sunny Optical and UMWELTBANK go up and down completely randomly.

Pair Corralation between Sunny Optical and UMWELTBANK

Assuming the 90 days horizon Sunny Optical Technology is not expected to generate positive returns. Moreover, Sunny Optical is 1.72 times more volatile than UMWELTBANK. It trades away all of its potential returns to assume current level of volatility. UMWELTBANK is currently generating about -0.06 per unit of risk. If you would invest  1,119  in Sunny Optical Technology on October 11, 2024 and sell it today you would lose (298.00) from holding Sunny Optical Technology or give up 26.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Sunny Optical Technology  vs.  UMWELTBANK

Sunny Optical Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 10 (%) 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.

UMWELTBANK

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, UMWELTBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and UMWELTBANK

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

The idea behind Sunny Optical Technology and UMWELTBANK 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.