Correlation Between Pepco Group and SUNEX SA

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

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

Diversification Opportunities for Pepco Group and SUNEX SA

-0.23

Correlation Coefficient

Pepco Group  SUNEX SA

Very good diversification

The 3 months correlation between Pepco and SUNEX is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and SUNEX SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNEX SA and Pepco Group 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 Pepco Group BV are associated (or correlated) with SUNEX SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNEX SA has no effect on the direction of Pepco Group i.e., Pepco Group and SUNEX SA go up and down completely randomly.

Pair Corralation between Pepco Group and SUNEX SA

Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the SUNEX SA. But the stock apears to be less risky and, when comparing its historical volatility, Pepco Group BV is 1.69 times less risky than SUNEX SA. The stock trades about -0.07 of its potential returns per unit of risk. The SUNEX SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  835.00  in SUNEX SA on October 27, 2024 and sell it today you would lose (73.00) from holding SUNEX SA or give up 8.74% of portfolio value over 90 days.

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

Pepco Group BV  vs.  SUNEX SA

Pepco Group BV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pepco Group BV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

SUNEX SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUNEX SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SUNEX SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pepco Group and SUNEX SA

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

The idea behind Pepco Group BV and SUNEX SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.