Correlation Between Sunny Optical and FIT Hon

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

By analyzing existing cross correlation between Sunny Optical Technology and FIT Hon Teng, you can compare the effects of market volatilities on Sunny Optical and FIT Hon 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 Optical with a short position of FIT Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and FIT Hon.

Diversification Opportunities for Sunny Optical and FIT Hon

0.64

Correlation Coefficient

Sunny Optical  FIT Hon

Poor diversification

The 3 months correlation between Sunny and FIT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and FIT Hon Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT Hon Teng and Sunny Optical 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 Optical Technology are associated (or correlated) with FIT Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT Hon Teng has no effect on the direction of Sunny Optical i.e., Sunny Optical and FIT Hon go up and down completely randomly.

Pair Corralation between Sunny Optical and FIT Hon

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 0.7 times more return on investment than FIT Hon. However, Sunny Optical Technology is 1.42 times less risky than FIT Hon. It trades about 0.2 of its potential returns per unit of risk. FIT Hon Teng is currently generating about 0.11 per unit of risk. If you would invest  7,308  in Sunny Optical Technology on September 20, 2024 and sell it today you would earn a total of  1,199  from holding Sunny Optical Technology or generate 16.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Sunny Optical Technology  vs.  FIT Hon Teng

Sunny Optical Technology

Risk-Adjusted Performance

12 of 100

Good

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

FIT Hon Teng

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIT Hon Teng are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, FIT Hon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and FIT Hon

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

The idea behind Sunny Optical Technology and FIT Hon Teng 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.