Correlation Between Software Circle and Sunny Optical
Can any of the company-specific risk be diversified away by investing in both Software Circle and Sunny Optical 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 Software Circle and Sunny Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Circle plc and Sunny Optical Technology, you can compare the effects of market volatilities on Software Circle and Sunny Optical 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 Software Circle with a short position of Sunny Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and Sunny Optical.
Diversification Opportunities for Software Circle and Sunny Optical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Software and Sunny is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology and Software Circle 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 Software Circle plc are associated (or correlated) with Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Software Circle i.e., Software Circle and Sunny Optical go up and down completely randomly.
Pair Corralation between Software Circle and Sunny Optical
Assuming the 90 days trading horizon Software Circle is expected to generate 1.3 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, Software Circle plc is 3.61 times less risky than Sunny Optical. It trades about 0.2 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,745 in Sunny Optical Technology on November 4, 2024 and sell it today you would earn a total of 260.00 from holding Sunny Optical Technology or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Software Circle plc vs. Sunny Optical Technology
Performance |
| Timeline |
| Software Circle plc |
| Sunny Optical Technology |
Software Circle and Sunny Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Circle and Sunny Optical
The main advantage of trading using opposite Software Circle and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle position performs unexpectedly, Sunny Optical 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 Sunny Optical will offset losses from the drop in Sunny Optical's long position.| Software Circle vs. Indutrade AB | Software Circle vs. Litigation Capital Management | Software Circle vs. Vietnam Enterprise Investments | Software Circle vs. Lowland Investment Co |
| Sunny Optical vs. Logitech International SA | Sunny Optical vs. Solstad Offshore ASA | Sunny Optical vs. Fortuna Silver Mines | Sunny Optical vs. Xeros Technology Group |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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