Correlation Between Champion Microelectronic and Sunonwealth Electric

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

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

Diversification Opportunities for Champion Microelectronic and Sunonwealth Electric

0.83

Correlation Coefficient

Champion Microelectronic  Sunonwealth Electric

Very poor diversification

The 3 months correlation between Champion and Sunonwealth is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Champion Microelectronic Corp and Sunonwealth Electric Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunonwealth Electric and Champion Microelectronic 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 Champion Microelectronic Corp are associated (or correlated) with Sunonwealth Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunonwealth Electric has no effect on the direction of Champion Microelectronic i.e., Champion Microelectronic and Sunonwealth Electric go up and down completely randomly.

Pair Corralation between Champion Microelectronic and Sunonwealth Electric

Assuming the 90 days trading horizon Champion Microelectronic Corp is expected to generate 1.09 times more return on investment than Sunonwealth Electric. However, Champion Microelectronic is 1.09 times more volatile than Sunonwealth Electric Machine. It trades about 0.11 of its potential returns per unit of risk. Sunonwealth Electric Machine is currently generating about 0.05 per unit of risk. If you would invest  5,210  in Champion Microelectronic Corp on September 3, 2024 and sell it today you would earn a total of  1,070  from holding Champion Microelectronic Corp or generate 20.54% return on investment over 90 days.

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

Champion Microelectronic Corp  vs.  Sunonwealth Electric Machine

Champion Microelectronic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Microelectronic Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Champion Microelectronic showed solid returns over the last few months and may actually be approaching a breakup point.

Sunonwealth Electric

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunonwealth Electric Machine are ranked lower than 4 (%) 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 January 2025.

Pair Trading with Champion Microelectronic and Sunonwealth Electric

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

The idea behind Champion Microelectronic Corp and Sunonwealth Electric Machine 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..