Correlation Between Victory New and Sunny Friend

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

By analyzing existing cross correlation between Victory New Materials and Sunny Friend Environmental, you can compare the effects of market volatilities on Victory New and Sunny Friend 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 Victory New with a short position of Sunny Friend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory New and Sunny Friend.

Diversification Opportunities for Victory New and Sunny Friend

0.3

Correlation Coefficient

Victory New  Sunny Friend

Weak diversification

The 3 months correlation between Victory and Sunny is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Victory New Materials and Sunny Friend Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Friend Environ and Victory New 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 Victory New Materials are associated (or correlated) with Sunny Friend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Friend Environ has no effect on the direction of Victory New i.e., Victory New and Sunny Friend go up and down completely randomly.

Pair Corralation between Victory New and Sunny Friend

Assuming the 90 days trading horizon Victory New Materials is expected to generate 0.4 times more return on investment than Sunny Friend. However, Victory New Materials is 2.52 times less risky than Sunny Friend. It trades about -0.33 of its potential returns per unit of risk. Sunny Friend Environmental is currently generating about -0.17 per unit of risk. If you would invest  1,050  in Victory New Materials on September 2, 2024 and sell it today you would lose (56.00) from holding Victory New Materials or give up 5.33% of portfolio value over 90 days.

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

Victory New Materials  vs.  Sunny Friend Environmental

Victory New Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Victory New Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Victory New is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sunny Friend Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunny Friend Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunny Friend is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Victory New and Sunny Friend

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

The idea behind Victory New Materials and Sunny Friend Environmental 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.