Correlation Between Sun Pacific and Ocean Power

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

By analyzing existing cross correlation between Sun Pacific Holding and Ocean Power Technologies, you can compare the effects of market volatilities on Sun Pacific and Ocean Power 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 Pacific with a short position of Ocean Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Pacific and Ocean Power.

Diversification Opportunities for Sun Pacific and Ocean Power

0.14

Correlation Coefficient

Sun Pacific  Ocean Power

Average diversification

The 3 months correlation between Sun and Ocean is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sun Pacific Holding and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power Technologies and Sun Pacific 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 Pacific Holding are associated (or correlated) with Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Sun Pacific i.e., Sun Pacific and Ocean Power go up and down completely randomly.

Pair Corralation between Sun Pacific and Ocean Power

Given the investment horizon of 90 days Sun Pacific Holding is expected to generate 1.69 times more return on investment than Ocean Power. However, Sun Pacific is 1.69 times more volatile than Ocean Power Technologies. It trades about 0.03 of its potential returns per unit of risk. Ocean Power Technologies is currently generating about 0.03 per unit of risk. If you would invest  2,526  in Sun Pacific Holding on September 24, 2024 and sell it today you would lose (2,366) from holding Sun Pacific Holding or give up 93.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sun Pacific Holding  vs.  Ocean Power Technologies

Sun Pacific Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Pacific Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sun Pacific showed solid returns over the last few months and may actually be approaching a breakup point.

Ocean Power Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Power Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ocean Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Pacific and Ocean Power

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

The idea behind Sun Pacific Holding and Ocean Power Technologies 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.