Correlation Between Sunny Friend and Evergreen Steel
Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Evergreen Steel 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 Evergreen Steel 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 Evergreen Steel Corp, you can compare the effects of market volatilities on Sunny Friend and Evergreen Steel 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 Evergreen Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Evergreen Steel.
Diversification Opportunities for Sunny Friend and Evergreen Steel
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunny and Evergreen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Evergreen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Steel Corp 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 Evergreen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Steel Corp has no effect on the direction of Sunny Friend i.e., Sunny Friend and Evergreen Steel go up and down completely randomly.
Pair Corralation between Sunny Friend and Evergreen Steel
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Evergreen Steel. But the stock apears to be less risky and, when comparing its historical volatility, Sunny Friend Environmental is 1.73 times less risky than Evergreen Steel. The stock trades about -0.18 of its potential returns per unit of risk. The Evergreen Steel Corp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 10,350 in Evergreen Steel Corp on November 2, 2024 and sell it today you would lose (1,510) from holding Evergreen Steel Corp or give up 14.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. Evergreen Steel Corp
Performance |
| Timeline |
| Sunny Friend Environ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Evergreen Steel Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sunny Friend and Evergreen Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and Evergreen Steel
The main advantage of trading using opposite Sunny Friend and Evergreen Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend position performs unexpectedly, Evergreen Steel 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 Evergreen Steel will offset losses from the drop in Evergreen Steel's long position.The idea behind Sunny Friend Environmental and Evergreen Steel Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |