Correlation Between Sunny Optical and Amazon

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

Diversification Opportunities for Sunny Optical and Amazon

0.82

Correlation Coefficient

Sunny Optical  Amazon

Very poor diversification

The 3 months correlation between Sunny and Amazon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Sunny Optical i.e., Sunny Optical and Amazon go up and down completely randomly.

Pair Corralation between Sunny Optical and Amazon

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 2.58 times more return on investment than Amazon. However, Sunny Optical is 2.58 times more volatile than Amazon Inc. It trades about 0.16 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.26 per unit of risk. If you would invest  580.00  in Sunny Optical Technology on September 26, 2024 and sell it today you would earn a total of  253.00  from holding Sunny Optical Technology or generate 43.62% return on investment over 90 days.

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

Sunny Optical Technology  vs.  Amazon Inc

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. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and Amazon

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

The idea behind Sunny Optical Technology and Amazon Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.