Correlation Between Solar Alliance and Suncor Energy

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

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

Diversification Opportunities for Solar Alliance and Suncor Energy

0.28

Correlation Coefficient

Solar Alliance  Suncor Energy

Modest diversification

The 3 months correlation between Solar and Suncor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Solar Alliance i.e., Solar Alliance and Suncor Energy go up and down completely randomly.

Pair Corralation between Solar Alliance and Suncor Energy

Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 7.44 times more volatile than Suncor Energy. It trades away all of its potential returns to assume current level of volatility. Suncor Energy is currently generating about 0.1 per unit of risk. If you would invest  5,033  in Suncor Energy on December 29, 2024 and sell it today you would earn a total of  459.00  from holding Suncor Energy or generate 9.12% return on investment over 90 days.

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

Solar Alliance Energy  vs.  Suncor Energy

Solar Alliance Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solar Alliance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Suncor Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suncor Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Suncor Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Solar Alliance and Suncor Energy

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

The idea behind Solar Alliance Energy and Suncor Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.