Correlation Between Sun Lif and Parex Resources

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

Diversification Opportunities for Sun Lif and Parex Resources

-0.63

Correlation Coefficient

Sun Lif  Parex Resources

Excellent diversification

The 3 months correlation between Sun and Parex is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of Sun Lif i.e., Sun Lif and Parex Resources go up and down completely randomly.

Pair Corralation between Sun Lif and Parex Resources

Assuming the 90 days trading horizon Sun Lif Non is expected to under-perform the Parex Resources. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Lif Non is 2.39 times less risky than Parex Resources. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Parex Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,286  in Parex Resources on September 3, 2024 and sell it today you would earn a total of  211.00  from holding Parex Resources or generate 16.41% return on investment over 90 days.

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

Sun Lif Non  vs.  Parex Resources

Sun Lif Non

Risk-Adjusted Performance

0 of 100

Very Weak

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

Parex Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Parex Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Lif and Parex Resources

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

The idea behind Sun Lif Non and Parex 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..