Correlation Between Sunny Friend and Te Chang
Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Te Chang 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 Te Chang 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 Te Chang Construction, you can compare the effects of market volatilities on Sunny Friend and Te Chang 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 Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Te Chang.
Diversification Opportunities for Sunny Friend and Te Chang
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sunny and 5511 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang Construction 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Sunny Friend i.e., Sunny Friend and Te Chang go up and down completely randomly.
Pair Corralation between Sunny Friend and Te Chang
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Te Chang. In addition to that, Sunny Friend is 1.55 times more volatile than Te Chang Construction. It trades about -0.17 of its total potential returns per unit of risk. Te Chang Construction is currently generating about 0.01 per unit of volatility. If you would invest 6,180 in Te Chang Construction on October 30, 2024 and sell it today you would earn a total of 30.00 from holding Te Chang Construction or generate 0.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. Te Chang Construction
Performance |
| Timeline |
| Sunny Friend Environ |
| Te Chang Construction |
Sunny Friend and Te Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and Te Chang
The main advantage of trading using opposite Sunny Friend and Te Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend position performs unexpectedly, Te Chang 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 Te Chang will offset losses from the drop in Te Chang's long position.| Sunny Friend vs. Cleanaway Co | Sunny Friend vs. Taiwan Secom Co | Sunny Friend vs. ECOVE Environment Corp | Sunny Friend vs. TTET Union Corp |
| Te Chang vs. Cayenne Entertainment Technology | Te Chang vs. Pili International Multimedia | Te Chang vs. Level Biotechnology | Te Chang vs. Genovate Biotechnology Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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