Correlation Between Newretail and Sunfun Info

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

By analyzing existing cross correlation between Newretail Co and Sunfun Info Co, you can compare the effects of market volatilities on Newretail and Sunfun Info 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 Newretail with a short position of Sunfun Info. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newretail and Sunfun Info.

Diversification Opportunities for Newretail and Sunfun Info

-0.17

Correlation Coefficient

Newretail  Sunfun Info

Good diversification

The 3 months correlation between Newretail and Sunfun is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Sunfun Info Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfun Info and Newretail 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 Newretail Co are associated (or correlated) with Sunfun Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfun Info has no effect on the direction of Newretail i.e., Newretail and Sunfun Info go up and down completely randomly.

Pair Corralation between Newretail and Sunfun Info

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Sunfun Info. But the stock apears to be less risky and, when comparing its historical volatility, Newretail Co is 3.03 times less risky than Sunfun Info. The stock trades about -0.21 of its potential returns per unit of risk. The Sunfun Info Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,100  in Sunfun Info Co on September 22, 2024 and sell it today you would earn a total of  595.00  from holding Sunfun Info Co or generate 19.19% return on investment over 90 days.

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

Newretail Co  vs.  Sunfun Info Co

Newretail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Sunfun Info

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunfun Info Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunfun Info showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newretail and Sunfun Info

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

The idea behind Newretail Co and Sunfun Info Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.