Correlation Between Sunrun and AER Energy

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

By analyzing existing cross correlation between Sunrun Inc and AER Energy Resources, you can compare the effects of market volatilities on Sunrun and AER Energy 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 Sunrun with a short position of AER Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunrun and AER Energy.

Diversification Opportunities for Sunrun and AER Energy

-0.35

Correlation Coefficient

Sunrun  AER Energy

Very good diversification

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

Pair Corralation between Sunrun and AER Energy

Considering the 90-day investment horizon Sunrun Inc is expected to under-perform the AER Energy. But the stock apears to be less risky and, when comparing its historical volatility, Sunrun Inc is 22.57 times less risky than AER Energy. The stock trades about -0.1 of its potential returns per unit of risk. The AER Energy Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in AER Energy Resources on September 3, 2024 and sell it today you would earn a total of  0.01  from holding AER Energy Resources or generate 9.223372036854776E16% return on investment over 90 days.

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

Sunrun Inc  vs.  AER Energy Resources

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunrun Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AER Energy Resources

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Sunrun and AER Energy

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

The idea behind Sunrun Inc and AER Energy Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.