Correlation Between Sun Peak and Magna Mining

Can any of the company-specific risk be diversified away by investing in both Sun Peak and Magna Mining 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 Magna Mining 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 Magna Mining, you can compare the effects of market volatilities on Sun Peak and Magna Mining 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 Magna Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Peak and Magna Mining.

Diversification Opportunities for Sun Peak and Magna Mining

0.21

Correlation Coefficient

Sun Peak  Magna Mining

Modest diversification

The 3 months correlation between Sun and Magna is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sun Peak Metals and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Sun Peak i.e., Sun Peak and Magna Mining go up and down completely randomly.

Pair Corralation between Sun Peak and Magna Mining

Assuming the 90 days trading horizon Sun Peak Metals is expected to under-perform the Magna Mining. In addition to that, Sun Peak is 1.33 times more volatile than Magna Mining. It trades about -0.01 of its total potential returns per unit of risk. Magna Mining is currently generating about 0.12 per unit of volatility. If you would invest  142.00  in Magna Mining on December 20, 2024 and sell it today you would earn a total of  36.00  from holding Magna Mining or generate 25.35% return on investment over 90 days.

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

Sun Peak Metals  vs.  Magna Mining

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

Magna Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Peak and Magna Mining

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

The idea behind Sun Peak Metals and Magna Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.