Correlation Between SUN and TLOS

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

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

Diversification Opportunities for SUN and TLOS

-0.31

Correlation Coefficient

SUN  TLOS

Very good diversification

The 3 months correlation between SUN and TLOS is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SUN and TLOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TLOS and SUN 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 are associated (or correlated) with TLOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TLOS has no effect on the direction of SUN i.e., SUN and TLOS go up and down completely randomly.

Pair Corralation between SUN and TLOS

Assuming the 90 days trading horizon SUN is expected to generate 1.12 times more return on investment than TLOS. However, SUN is 1.12 times more volatile than TLOS. It trades about -0.01 of its potential returns per unit of risk. TLOS is currently generating about -0.02 per unit of risk. If you would invest  2.77  in SUN on September 3, 2024 and sell it today you would lose (0.38) from holding SUN or give up 13.72% of portfolio value over 90 days.

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

SUN  vs.  TLOS

SUN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SUN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TLOS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TLOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, TLOS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SUN and TLOS

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

The idea behind SUN and TLOS 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.