Correlation Between Sun Lif and Valeura Energy
Can any of the company-specific risk be diversified away by investing in both Sun Lif and Valeura Energy 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 Lif and Valeura Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Lif Non and Valeura Energy, you can compare the effects of market volatilities on Sun Lif and Valeura Energy 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 Lif with a short position of Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Lif and Valeura Energy.
Diversification Opportunities for Sun Lif and Valeura Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sun and Valeura is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy and Sun Lif 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 Lif Non are associated (or correlated) with Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Sun Lif i.e., Sun Lif and Valeura Energy go up and down completely randomly.
Pair Corralation between Sun Lif and Valeura Energy
Assuming the 90 days trading horizon Sun Lif is expected to generate 5.9 times less return on investment than Valeura Energy. But when comparing it to its historical volatility, Sun Lif Non is 3.86 times less risky than Valeura Energy. It trades about 0.06 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 150.00 in Valeura Energy on September 3, 2024 and sell it today you would earn a total of 472.00 from holding Valeura Energy or generate 314.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Lif Non vs. Valeura Energy
Performance |
| Timeline |
| Sun Lif Non |
| Valeura Energy |
Sun Lif and Valeura Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Lif and Valeura Energy
The main advantage of trading using opposite Sun Lif and Valeura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Lif position performs unexpectedly, Valeura Energy 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 Valeura Energy will offset losses from the drop in Valeura Energy's long position.The idea behind Sun Lif Non and Valeura Energy 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 CEOs Directory module to screen CEOs from public companies around the world.
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