Correlation Between Sunlight Financial and New Amer

Can any of the company-specific risk be diversified away by investing in both Sunlight Financial and New Amer 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 Sunlight Financial and New Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sunlight Financial and New Amer

0.26

Correlation Coefficient

Sunlight Financial  New Amer

Modest diversification

The 3 months correlation between Sunlight and New is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sunlight Financial Holdings and New Amer Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Amer Energy and Sunlight Financial 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 Sunlight Financial Holdings are associated (or correlated) with New Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Amer Energy has no effect on the direction of Sunlight Financial i.e., Sunlight Financial and New Amer go up and down completely randomly.

Pair Corralation between Sunlight Financial and New Amer

Given the investment horizon of 90 days Sunlight Financial Holdings is expected to under-perform the New Amer. But the stock apears to be less risky and, when comparing its historical volatility, Sunlight Financial Holdings is 5.03 times less risky than New Amer. The stock trades about -0.07 of its potential returns per unit of risk. The New Amer Energy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in New Amer Energy on September 3, 2024 and sell it today you would earn a total of  0.00  from holding New Amer Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.35%
Values	Daily Returns

Sunlight Financial Holdings  vs.  New Amer Energy

Sunlight Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunlight Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sunlight Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

New Amer Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sunlight Financial and New Amer

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

The idea behind Sunlight Financial Holdings and New Amer 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.