Correlation Between Werner Enterprises and Sunny Optical

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

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

Diversification Opportunities for Werner Enterprises and Sunny Optical

0.68

Correlation Coefficient

Werner Enterprises  Sunny Optical

Poor diversification

The 3 months correlation between Werner and Sunny is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology and Werner Enterprises 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 Werner Enterprises are associated (or correlated) with Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Werner Enterprises i.e., Werner Enterprises and Sunny Optical go up and down completely randomly.

Pair Corralation between Werner Enterprises and Sunny Optical

Assuming the 90 days horizon Werner Enterprises is expected to generate 33.34 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, Werner Enterprises is 2.24 times less risky than Sunny Optical. It trades about 0.03 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  664.00  in Sunny Optical Technology on September 16, 2024 and sell it today you would earn a total of  160.00  from holding Sunny Optical Technology or generate 24.1% return on investment over 90 days.

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

Werner Enterprises  vs.  Sunny Optical Technology

Werner Enterprises

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Werner Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sunny Optical Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 17 (%) 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.

Pair Trading with Werner Enterprises and Sunny Optical

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

The idea behind Werner Enterprises and Sunny Optical Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.