Correlation Between Sun Peak and Diamond Estates

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

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

Diversification Opportunities for Sun Peak and Diamond Estates

0.27

Correlation Coefficient

Sun Peak  Diamond Estates

Modest diversification

The 3 months correlation between Sun and Diamond is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sun Peak Metals and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and Sun Peak 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 Sun Peak Metals are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Sun Peak i.e., Sun Peak and Diamond Estates go up and down completely randomly.

Pair Corralation between Sun Peak and Diamond Estates

Assuming the 90 days trading horizon Sun Peak Metals is expected to generate 1.47 times more return on investment than Diamond Estates. However, Sun Peak is 1.47 times more volatile than Diamond Estates Wines. It trades about -0.02 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.06 per unit of risk. If you would invest  31.00  in Sun Peak Metals on December 20, 2024 and sell it today you would lose (4.00) from holding Sun Peak Metals or give up 12.9% of portfolio value over 90 days.

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

Sun Peak Metals  vs.  Diamond Estates Wines

Sun Peak Metals

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sun Peak and Diamond Estates

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

The idea behind Sun Peak Metals and Diamond Estates Wines 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.