Correlation Between Sunfon Construction and China General
Can any of the company-specific risk be diversified away by investing in both Sunfon Construction and China General 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 Sunfon Construction and China General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunfon Construction Co and China General Plastics, you can compare the effects of market volatilities on Sunfon Construction and China General 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 Sunfon Construction with a short position of China General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunfon Construction and China General.
Diversification Opportunities for Sunfon Construction and China General
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sunfon and China is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sunfon Construction Co and China General Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China General Plastics and Sunfon Construction 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 Sunfon Construction Co are associated (or correlated) with China General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China General Plastics has no effect on the direction of Sunfon Construction i.e., Sunfon Construction and China General go up and down completely randomly.
Pair Corralation between Sunfon Construction and China General
Assuming the 90 days trading horizon Sunfon Construction Co is expected to under-perform the China General. But the stock apears to be less risky and, when comparing its historical volatility, Sunfon Construction Co is 2.86 times less risky than China General. The stock trades about -0.11 of its potential returns per unit of risk. The China General Plastics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,225 in China General Plastics on November 5, 2024 and sell it today you would earn a total of 30.00 from holding China General Plastics or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunfon Construction Co vs. China General Plastics
Performance |
| Timeline |
| Sunfon Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| China General Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sunfon Construction and China General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunfon Construction and China General
The main advantage of trading using opposite Sunfon Construction and China General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunfon Construction position performs unexpectedly, China General 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 General will offset losses from the drop in China General's long position.The idea behind Sunfon Construction Co and China General Plastics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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