Correlation Between SUN ART and CN MODERN

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

By analyzing existing cross correlation between SUN ART RETAIL and CN MODERN DAIRY, you can compare the effects of market volatilities on SUN ART and CN MODERN 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 SUN ART with a short position of CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN ART and CN MODERN.

Diversification Opportunities for SUN ART and CN MODERN

0.46

Correlation Coefficient

SUN ART  CN MODERN

Very weak diversification

The 3 months correlation between SUN and 07M is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SUN ART RETAIL and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY and SUN ART 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 SUN ART RETAIL are associated (or correlated) with CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of SUN ART i.e., SUN ART and CN MODERN go up and down completely randomly.

Pair Corralation between SUN ART and CN MODERN

Assuming the 90 days trading horizon SUN ART RETAIL is expected to generate 1.19 times more return on investment than CN MODERN. However, SUN ART is 1.19 times more volatile than CN MODERN DAIRY. It trades about 0.15 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about 0.11 per unit of risk. If you would invest  25.00  in SUN ART RETAIL on September 23, 2024 and sell it today you would earn a total of  6.00  from holding SUN ART RETAIL or generate 24.0% return on investment over 90 days.

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

SUN ART RETAIL  vs.  CN MODERN DAIRY

SUN ART RETAIL

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SUN ART RETAIL are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SUN ART exhibited solid returns over the last few months and may actually be approaching a breakup point.

CN MODERN DAIRY

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SUN ART and CN MODERN

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

The idea behind SUN ART RETAIL and CN MODERN DAIRY 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.