Correlation Between Sunonwealth Electric and Asia Metal

Can any of the company-specific risk be diversified away by investing in both Sunonwealth Electric and Asia Metal 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 Sunonwealth Electric and Asia Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunonwealth Electric Machine and Asia Metal Industries, you can compare the effects of market volatilities on Sunonwealth Electric and Asia Metal 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 Sunonwealth Electric with a short position of Asia Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunonwealth Electric and Asia Metal.

Diversification Opportunities for Sunonwealth Electric and Asia Metal

0.43

Correlation Coefficient

Sunonwealth Electric  Asia Metal

Very weak diversification

The 3 months correlation between Sunonwealth and Asia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sunonwealth Electric Machine and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries and Sunonwealth Electric 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 Sunonwealth Electric Machine are associated (or correlated) with Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Industries has no effect on the direction of Sunonwealth Electric i.e., Sunonwealth Electric and Asia Metal go up and down completely randomly.

Pair Corralation between Sunonwealth Electric and Asia Metal

Assuming the 90 days trading horizon Sunonwealth Electric Machine is expected to under-perform the Asia Metal. In addition to that, Sunonwealth Electric is 1.04 times more volatile than Asia Metal Industries. It trades about -0.04 of its total potential returns per unit of risk. Asia Metal Industries is currently generating about 0.09 per unit of volatility. If you would invest  6,820  in Asia Metal Industries on August 31, 2024 and sell it today you would earn a total of  1,980  from holding Asia Metal Industries or generate 29.03% return on investment over 90 days.

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

Sunonwealth Electric Machine  vs.  Asia Metal Industries

Sunonwealth Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunonwealth Electric Machine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunonwealth Electric may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Asia Metal Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Metal Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asia Metal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunonwealth Electric and Asia Metal

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

The idea behind Sunonwealth Electric Machine and Asia Metal Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.