Correlation Between Sunny Electronics and NICE Information

Can any of the company-specific risk be diversified away by investing in both Sunny Electronics and NICE Information 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 Electronics and NICE Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunny Electronics Corp and NICE Information Service, you can compare the effects of market volatilities on Sunny Electronics and NICE Information 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 Electronics with a short position of NICE Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Electronics and NICE Information.

Diversification Opportunities for Sunny Electronics and NICE Information

0.49

Correlation Coefficient

Sunny Electronics  NICE Information

Very weak diversification

The 3 months correlation between Sunny and NICE is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Electronics Corp and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service and Sunny Electronics 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 Electronics Corp are associated (or correlated) with NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of Sunny Electronics i.e., Sunny Electronics and NICE Information go up and down completely randomly.

Pair Corralation between Sunny Electronics and NICE Information

Assuming the 90 days trading horizon Sunny Electronics is expected to generate 19.14 times less return on investment than NICE Information. But when comparing it to its historical volatility, Sunny Electronics Corp is 1.45 times less risky than NICE Information. It trades about 0.01 of its potential returns per unit of risk. NICE Information Service is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,025,000  in NICE Information Service on September 1, 2024 and sell it today you would earn a total of  181,000  from holding NICE Information Service or generate 17.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sunny Electronics Corp  vs.  NICE Information Service

Sunny Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunny Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sunny Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NICE Information Service

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Electronics and NICE Information

The main advantage of trading using opposite Sunny Electronics and NICE Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Electronics position performs unexpectedly, NICE Information 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 NICE Information will offset losses from the drop in NICE Information's long position.

The idea behind Sunny Electronics Corp and NICE Information Service 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.