Correlation Between Dream Office and Sun Peak

Can any of the company-specific risk be diversified away by investing in both Dream Office and Sun Peak 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 Dream Office and Sun Peak into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dream Office Real and Sun Peak Metals, you can compare the effects of market volatilities on Dream Office and Sun Peak 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 Dream Office with a short position of Sun Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Office and Sun Peak.

Diversification Opportunities for Dream Office and Sun Peak

0.88

Correlation Coefficient

Dream Office  Sun Peak

Very poor diversification

The 3 months correlation between Dream and Sun is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dream Office Real and Sun Peak Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Peak Metals and Dream Office 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 Dream Office Real are associated (or correlated) with Sun Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Peak Metals has no effect on the direction of Dream Office i.e., Dream Office and Sun Peak go up and down completely randomly.

Pair Corralation between Dream Office and Sun Peak

Assuming the 90 days trading horizon Dream Office Real is expected to under-perform the Sun Peak. But the stock apears to be less risky and, when comparing its historical volatility, Dream Office Real is 2.06 times less risky than Sun Peak. The stock trades about -0.04 of its potential returns per unit of risk. The Sun Peak Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Sun Peak Metals on October 26, 2024 and sell it today you would lose (2.00) from holding Sun Peak Metals or give up 6.67% of portfolio value over 90 days.

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

Dream Office Real  vs.  Sun Peak Metals

Dream Office Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Office Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sun Peak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Peak Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Dream Office and Sun Peak

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

The idea behind Dream Office Real and Sun Peak Metals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.