Correlation Between Sunny Friend and Hong Tai
Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Hong Tai 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 Friend and Hong Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunny Friend Environmental and Hong Tai Electric, you can compare the effects of market volatilities on Sunny Friend and Hong Tai 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 Friend with a short position of Hong Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Hong Tai.
Diversification Opportunities for Sunny Friend and Hong Tai
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sunny and Hong is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Hong Tai Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Tai Electric and Sunny Friend 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 Friend Environmental are associated (or correlated) with Hong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Tai Electric has no effect on the direction of Sunny Friend i.e., Sunny Friend and Hong Tai go up and down completely randomly.
Pair Corralation between Sunny Friend and Hong Tai
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Hong Tai. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Friend Environmental is 1.28 times less risky than Hong Tai. The stock trades about -0.04 of its potential returns per unit of risk. The Hong Tai Electric is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,675 in Hong Tai Electric on August 26, 2024 and sell it today you would earn a total of 1,760 from holding Hong Tai Electric or generate 105.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. Hong Tai Electric
Performance |
| Timeline |
| Sunny Friend Environ |
| Hong Tai Electric |
Sunny Friend and Hong Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and Hong Tai
The main advantage of trading using opposite Sunny Friend and Hong Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend position performs unexpectedly, Hong Tai 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 Hong Tai will offset losses from the drop in Hong Tai's long position.| Sunny Friend vs. Cleanaway Co | Sunny Friend vs. Taiwan Secom Co | Sunny Friend vs. TTET Union Corp | Sunny Friend vs. Tehmag Foods |
| Hong Tai vs. Sunny Friend Environmental | Hong Tai vs. TTET Union Corp | Hong Tai vs. ECOVE Environment Corp | Hong Tai vs. Yulon Finance Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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