Correlation Between Sun Summit and Searchlight Minerals

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

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

Diversification Opportunities for Sun Summit and Searchlight Minerals

0.67

Correlation Coefficient

Sun Summit  Searchlight Minerals

Poor diversification

The 3 months correlation between Sun and Searchlight is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sun Summit Minerals and Searchlight Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Searchlight Minerals Corp and Sun Summit 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 Summit Minerals are associated (or correlated) with Searchlight Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Searchlight Minerals Corp has no effect on the direction of Sun Summit i.e., Sun Summit and Searchlight Minerals go up and down completely randomly.

Pair Corralation between Sun Summit and Searchlight Minerals

Assuming the 90 days horizon Sun Summit is expected to generate 2.41 times less return on investment than Searchlight Minerals. But when comparing it to its historical volatility, Sun Summit Minerals is 1.53 times less risky than Searchlight Minerals. It trades about 0.06 of its potential returns per unit of risk. Searchlight Minerals Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Searchlight Minerals Corp on October 12, 2024 and sell it today you would lose (0.37) from holding Searchlight Minerals Corp or give up 61.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.5%
Values	Daily Returns

Sun Summit Minerals  vs.  Searchlight Minerals Corp

Sun Summit Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Summit Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Searchlight Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Searchlight Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Searchlight Minerals is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sun Summit and Searchlight Minerals

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

The idea behind Sun Summit Minerals and Searchlight Minerals Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.