Correlation Between Sunny Optical and ScanSource

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

Diversification Opportunities for Sunny Optical and ScanSource

0.04

Correlation Coefficient

Sunny Optical  ScanSource

Significant diversification

The 3 months correlation between Sunny and ScanSource is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Sunny Optical i.e., Sunny Optical and ScanSource go up and down completely randomly.

Pair Corralation between Sunny Optical and ScanSource

Assuming the 90 days horizon Sunny Optical is expected to generate 1.43 times less return on investment than ScanSource. In addition to that, Sunny Optical is 1.31 times more volatile than ScanSource. It trades about 0.11 of its total potential returns per unit of risk. ScanSource is currently generating about 0.21 per unit of volatility. If you would invest  2,540  in ScanSource on April 7, 2025 and sell it today you would earn a total of  1,060  from holding ScanSource or generate 41.73% return on investment over 90 days.

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

Sunny Optical Technology  vs.  ScanSource

Sunny Optical Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 8 (%) 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.

ScanSource

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ScanSource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunny Optical and ScanSource

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

The idea behind Sunny Optical Technology and ScanSource 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.