Correlation Between Sun Lif and CES Energy

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

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

Diversification Opportunities for Sun Lif and CES Energy

-0.4

Correlation Coefficient

Sun Lif  CES Energy

Very good diversification

The 3 months correlation between Sun and CES is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Sun Lif 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 Lif Non are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Sun Lif i.e., Sun Lif and CES Energy go up and down completely randomly.

Pair Corralation between Sun Lif and CES Energy

Assuming the 90 days trading horizon Sun Lif Non is expected to generate 0.61 times more return on investment than CES Energy. However, Sun Lif Non is 1.64 times less risky than CES Energy. It trades about 0.09 of its potential returns per unit of risk. CES Energy Solutions is currently generating about -0.18 per unit of risk. If you would invest  1,909  in Sun Lif Non on December 29, 2024 and sell it today you would earn a total of  136.00  from holding Sun Lif Non or generate 7.12% return on investment over 90 days.

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

Sun Lif Non  vs.  CES Energy Solutions

Sun Lif Non

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Sun Lif may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CES Energy Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days CES Energy Solutions 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sun Lif and CES Energy

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

The idea behind Sun Lif Non and CES Energy Solutions 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 CEOs Directory module to screen CEOs from public companies around the world.