Correlation Between Sun Sea and Yuan High
Can any of the company-specific risk be diversified away by investing in both Sun Sea and Yuan High 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 Sun Sea and Yuan High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Sea Construction and Yuan High Tech Development, you can compare the effects of market volatilities on Sun Sea and Yuan High 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 Sun Sea with a short position of Yuan High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Sea and Yuan High.
Diversification Opportunities for Sun Sea and Yuan High
Poor diversification
The 3 months correlation between Sun and Yuan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sun Sea Construction and Yuan High Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan High Tech and Sun Sea 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 Sun Sea Construction are associated (or correlated) with Yuan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan High Tech has no effect on the direction of Sun Sea i.e., Sun Sea and Yuan High go up and down completely randomly.
Pair Corralation between Sun Sea and Yuan High
Assuming the 90 days trading horizon Sun Sea Construction is expected to under-perform the Yuan High. But the stock apears to be less risky and, when comparing its historical volatility, Sun Sea Construction is 2.14 times less risky than Yuan High. The stock trades about -0.01 of its potential returns per unit of risk. The Yuan High Tech Development is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 12,811 in Yuan High Tech Development on November 8, 2024 and sell it today you would earn a total of 7,839 from holding Yuan High Tech Development or generate 61.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Sea Construction vs. Yuan High Tech Development
Performance |
| Timeline |
| Sun Sea Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Yuan High Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Sun Sea and Yuan High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Sea and Yuan High
The main advantage of trading using opposite Sun Sea and Yuan High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Sea position performs unexpectedly, Yuan High 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 Yuan High will offset losses from the drop in Yuan High's long position.The idea behind Sun Sea Construction and Yuan High Tech Development 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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