Correlation Between Sunny Friend and Forest Water
Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Forest Water 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 Forest Water 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 Forest Water Environmental, you can compare the effects of market volatilities on Sunny Friend and Forest Water 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 Forest Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Forest Water.
Diversification Opportunities for Sunny Friend and Forest Water
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sunny and Forest is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Forest Water Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forest Water Environ 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 Forest Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forest Water Environ has no effect on the direction of Sunny Friend i.e., Sunny Friend and Forest Water go up and down completely randomly.
Pair Corralation between Sunny Friend and Forest Water
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to generate 1.45 times more return on investment than Forest Water. However, Sunny Friend is 1.45 times more volatile than Forest Water Environmental. It trades about -0.1 of its potential returns per unit of risk. Forest Water Environmental is currently generating about -0.33 per unit of risk. If you would invest 9,830 in Sunny Friend Environmental on August 29, 2024 and sell it today you would lose (440.00) from holding Sunny Friend Environmental or give up 4.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. Forest Water Environmental
Performance |
| Timeline |
| Sunny Friend Environ |
| Forest Water Environ |
Sunny Friend and Forest Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and Forest Water
The main advantage of trading using opposite Sunny Friend and Forest Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend position performs unexpectedly, Forest Water 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 Forest Water will offset losses from the drop in Forest Water'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 |
| Forest Water vs. Cleanaway Co | Forest Water vs. Sunny Friend Environmental | Forest Water vs. Taiwan Secom Co | Forest Water vs. Taiwan Shin Kong |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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