Correlation Between Sunny Optical and Solstad Offshore

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

Diversification Opportunities for Sunny Optical and Solstad Offshore

0.63

Correlation Coefficient

Sunny Optical  Solstad Offshore

Poor diversification

The 3 months correlation between Sunny and Solstad is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Sunny Optical i.e., Sunny Optical and Solstad Offshore go up and down completely randomly.

Pair Corralation between Sunny Optical and Solstad Offshore

Assuming the 90 days horizon Sunny Optical Technology is expected to generate 1.03 times more return on investment than Solstad Offshore. However, Sunny Optical is 1.03 times more volatile than Solstad Offshore ASA. It trades about 0.21 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.06 per unit of risk. If you would invest  498.00  in Sunny Optical Technology on September 13, 2024 and sell it today you would earn a total of  297.00  from holding Sunny Optical Technology or generate 59.64% return on investment over 90 days.

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

Sunny Optical Technology  vs.  Solstad Offshore ASA

Sunny Optical Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 16 (%) 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.

Solstad Offshore ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and Solstad Offshore

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

The idea behind Sunny Optical Technology and Solstad Offshore ASA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.