Correlation Between MLN and SUN

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

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

Diversification Opportunities for MLN and SUN

0.96

Correlation Coefficient

MLN  SUN

Almost no diversification

The 3 months correlation between MLN and SUN is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MLN and SUN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUN and MLN 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 MLN are associated (or correlated) with SUN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUN has no effect on the direction of MLN i.e., MLN and SUN go up and down completely randomly.

Pair Corralation between MLN and SUN

Assuming the 90 days trading horizon MLN is expected to under-perform the SUN. But the crypto coin apears to be less risky and, when comparing its historical volatility, MLN is 1.15 times less risky than SUN. The crypto coin trades about -0.24 of its potential returns per unit of risk. The SUN is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2.45  in SUN on December 28, 2024 and sell it today you would lose (0.79) from holding SUN or give up 32.24% of portfolio value over 90 days.

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

MLN  vs.  SUN

MLN

Risk-Adjusted Performance

Very Weak

Over the last 90 days MLN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for MLN shareholders.

SUN

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for SUN shareholders.

Pair Trading with MLN and SUN

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

The idea behind MLN and SUN 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.