Correlation Between Sun Peak and Solution Financial

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

Diversification Opportunities for Sun Peak and Solution Financial

0.18

Correlation Coefficient

Sun Peak  Solution Financial

Average diversification

The 3 months correlation between Sun and Solution is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sun Peak Metals and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Sun Peak i.e., Sun Peak and Solution Financial go up and down completely randomly.

Pair Corralation between Sun Peak and Solution Financial

Assuming the 90 days trading horizon Sun Peak Metals is expected to generate 1.96 times more return on investment than Solution Financial. However, Sun Peak is 1.96 times more volatile than Solution Financial. It trades about 0.01 of its potential returns per unit of risk. Solution Financial is currently generating about -0.03 per unit of risk. If you would invest  34.00  in Sun Peak Metals on October 9, 2024 and sell it today you would lose (1.00) from holding Sun Peak Metals or give up 2.94% of portfolio value over 90 days.

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

Sun Peak Metals  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sun Peak and Solution Financial

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

The idea behind Sun Peak Metals and Solution Financial 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.