Correlation Between SUN ART and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both SUN ART and GEAR4MUSIC 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 GEAR4MUSIC 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on SUN ART and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN ART and GEAR4MUSIC.

Diversification Opportunities for SUN ART and GEAR4MUSIC

-0.19

Correlation Coefficient

SUN ART  GEAR4MUSIC

Good diversification

The 3 months correlation between SUN and GEAR4MUSIC is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SUN ART RETAIL and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of SUN ART i.e., SUN ART and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between SUN ART and GEAR4MUSIC

Assuming the 90 days trading horizon SUN ART RETAIL is expected to generate 2.56 times more return on investment than GEAR4MUSIC. However, SUN ART is 2.56 times more volatile than GEAR4MUSIC LS 10. It trades about 0.09 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.04 per unit of risk. If you would invest  12.00  in SUN ART RETAIL on September 24, 2024 and sell it today you would earn a total of  19.00  from holding SUN ART RETAIL or generate 158.33% return on investment over 90 days.

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

SUN ART RETAIL  vs.  GEAR4MUSIC LS 10

SUN ART RETAIL

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SUN ART RETAIL are ranked lower than 16 (%) 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.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GEAR4MUSIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SUN ART and GEAR4MUSIC

The main advantage of trading using opposite SUN ART and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUN ART position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind SUN ART RETAIL and GEAR4MUSIC LS 10 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.