Correlation Between Sun Life and Energy Fuels

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

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

Diversification Opportunities for Sun Life and Energy Fuels

-0.45

Correlation Coefficient

Sun Life  Energy Fuels

Very good diversification

The 3 months correlation between Sun and Energy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Non and Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fuels and Sun Life 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 Life Non are associated (or correlated) with Energy Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fuels has no effect on the direction of Sun Life i.e., Sun Life and Energy Fuels go up and down completely randomly.

Pair Corralation between Sun Life and Energy Fuels

Assuming the 90 days trading horizon Sun Life Non is expected to under-perform the Energy Fuels. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Non is 5.72 times less risky than Energy Fuels. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Energy Fuels is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  618.00  in Energy Fuels on September 17, 2024 and sell it today you would earn a total of  233.00  from holding Energy Fuels or generate 37.7% return on investment over 90 days.

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

Sun Life Non  vs.  Energy Fuels

Sun Life Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Life Non has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy Fuels

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fuels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Energy Fuels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Energy Fuels

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

The idea behind Sun Life Non and Energy Fuels 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.