Correlation Between Sunny Optical and US FOODS

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

Diversification Opportunities for Sunny Optical and US FOODS

0.85

Correlation Coefficient

Sunny Optical  US FOODS

Very poor diversification

The 3 months correlation between Sunny and UFH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Sunny Optical i.e., Sunny Optical and US FOODS go up and down completely randomly.

Pair Corralation between Sunny Optical and US FOODS

Assuming the 90 days horizon Sunny Optical Technology is expected to under-perform the US FOODS. In addition to that, Sunny Optical is 2.47 times more volatile than US FOODS HOLDING. It trades about -0.08 of its total potential returns per unit of risk. US FOODS HOLDING is currently generating about 0.08 per unit of volatility. If you would invest  6,500  in US FOODS HOLDING on October 24, 2024 and sell it today you would earn a total of  100.00  from holding US FOODS HOLDING or generate 1.54% return on investment over 90 days.

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

Sunny Optical Technology  vs.  US FOODS HOLDING

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.

US FOODS HOLDING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and US FOODS

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

The idea behind Sunny Optical Technology and US FOODS HOLDING 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.