Correlation Between Sun Lif and STEP Energy

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

Diversification Opportunities for Sun Lif and STEP Energy

-0.49

Correlation Coefficient

Sun Lif  STEP Energy

Very good diversification

The 3 months correlation between Sun and STEP is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Sun Lif i.e., Sun Lif and STEP Energy go up and down completely randomly.

Pair Corralation between Sun Lif and STEP Energy

Assuming the 90 days trading horizon Sun Lif Non is expected to generate 0.33 times more return on investment than STEP Energy. However, Sun Lif Non is 3.03 times less risky than STEP Energy. It trades about 0.05 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.0 per unit of risk. If you would invest  1,484  in Sun Lif Non on October 9, 2024 and sell it today you would earn a total of  456.00  from holding Sun Lif Non or generate 30.73% 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.  STEP Energy Services

Sun Lif Non

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

STEP Energy Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STEP Energy Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, STEP Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Lif and STEP Energy

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

The idea behind Sun Lif Non and STEP Energy Services 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.