Correlation Between Pason Systems and Suncor Energy

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

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

Diversification Opportunities for Pason Systems and Suncor Energy

0.89

Correlation Coefficient

Pason Systems  Suncor Energy

Very poor diversification

The 3 months correlation between Pason and Suncor is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pason Systems and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy and Pason Systems 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 Pason Systems 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 Pason Systems i.e., Pason Systems and Suncor Energy go up and down completely randomly.

Pair Corralation between Pason Systems and Suncor Energy

Assuming the 90 days trading horizon Pason Systems is expected to generate 1.87 times less return on investment than Suncor Energy. In addition to that, Pason Systems is 1.08 times more volatile than Suncor Energy. It trades about 0.02 of its total potential returns per unit of risk. Suncor Energy is currently generating about 0.05 per unit of volatility. If you would invest  5,343  in Suncor Energy on September 3, 2024 and sell it today you would earn a total of  228.00  from holding Suncor Energy or generate 4.27% return on investment over 90 days.

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

Pason Systems  vs.  Suncor Energy

Pason Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pason Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pason Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Suncor Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Suncor Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Suncor Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pason Systems and Suncor Energy

The main advantage of trading using opposite Pason Systems and Suncor Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pason Systems 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 Pason Systems 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.