Correlation Between Sun Peak and Renoworks Software

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

Diversification Opportunities for Sun Peak and Renoworks Software

-0.35

Correlation Coefficient

Sun Peak  Renoworks Software

Very good diversification

The 3 months correlation between Sun and Renoworks is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sun Peak Metals and Renoworks Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renoworks Software 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 Renoworks Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renoworks Software has no effect on the direction of Sun Peak i.e., Sun Peak and Renoworks Software go up and down completely randomly.

Pair Corralation between Sun Peak and Renoworks Software

Assuming the 90 days trading horizon Sun Peak Metals is expected to generate 2.2 times more return on investment than Renoworks Software. However, Sun Peak is 2.2 times more volatile than Renoworks Software. It trades about 0.05 of its potential returns per unit of risk. Renoworks Software is currently generating about -0.15 per unit of risk. If you would invest  32.00  in Sun Peak Metals on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Sun Peak Metals or generate 3.13% return on investment over 90 days.

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

Sun Peak Metals  vs.  Renoworks Software

Sun Peak Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Peak Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Renoworks Software

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Sun Peak and Renoworks Software

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

The idea behind Sun Peak Metals and Renoworks Software 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.