Correlation Between Definity Financial and Sun Peak

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

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

Diversification Opportunities for Definity Financial and Sun Peak

-0.74

Correlation Coefficient

Definity Financial  Sun Peak

Pay attention - limited upside

The 3 months correlation between Definity and Sun is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Definity Financial Corp 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 Definity Financial 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 Definity Financial Corp 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 Definity Financial i.e., Definity Financial and Sun Peak go up and down completely randomly.

Pair Corralation between Definity Financial and Sun Peak

Assuming the 90 days trading horizon Definity Financial is expected to generate 2.0 times less return on investment than Sun Peak. But when comparing it to its historical volatility, Definity Financial Corp is 4.22 times less risky than Sun Peak. It trades about 0.07 of its potential returns per unit of risk. Sun Peak Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Sun Peak Metals on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Sun Peak Metals or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Definity Financial Corp  vs.  Sun Peak Metals

Definity Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Definity Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Definity Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fairly stable basic indicators, Sun Peak is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Definity Financial and Sun Peak

The main advantage of trading using opposite Definity Financial and Sun Peak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definity Financial 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 Definity Financial Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.