Correlation Between New Zealand and Sun Peak

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

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

Diversification Opportunities for New Zealand and Sun Peak

-0.66

Correlation Coefficient

New Zealand  Sun Peak

Excellent diversification

The 3 months correlation between New and Sun is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding New Zealand Energy 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 New Zealand 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 New Zealand Energy 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 New Zealand i.e., New Zealand and Sun Peak go up and down completely randomly.

Pair Corralation between New Zealand and Sun Peak

Given the investment horizon of 90 days New Zealand Energy is expected to generate 2.31 times more return on investment than Sun Peak. However, New Zealand is 2.31 times more volatile than Sun Peak Metals. It trades about 0.11 of its potential returns per unit of risk. Sun Peak Metals is currently generating about -0.12 per unit of risk. If you would invest  50.00  in New Zealand Energy on October 26, 2024 and sell it today you would earn a total of  27.00  from holding New Zealand Energy or generate 54.0% return on investment over 90 days.

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

New Zealand Energy  vs.  Sun Peak Metals

New Zealand Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Zealand Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, New Zealand showed solid returns over the last few months and may actually be approaching a breakup point.

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 New Zealand and Sun Peak

The main advantage of trading using opposite New Zealand and Sun Peak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Zealand 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 New Zealand Energy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.