Correlation Between Sunworks and SunPower

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

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

Diversification Opportunities for Sunworks and SunPower

-0.58

Correlation Coefficient

Sunworks  SunPower

Excellent diversification

The 3 months correlation between Sunworks and SunPower is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sunworks and SunPower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunPower and Sunworks 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 Sunworks are associated (or correlated) with SunPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunPower has no effect on the direction of Sunworks i.e., Sunworks and SunPower go up and down completely randomly.

Pair Corralation between Sunworks and SunPower

If you would invest  0.00  in SunPower on September 2, 2024 and sell it today you would earn a total of  0.00  from holding SunPower or generate 0.0% return on investment over 90 days.

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

Sunworks  vs.  SunPower

Sunworks

Risk-Adjusted Performance

0 of 100

Very Weak

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

SunPower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunPower has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SunPower is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sunworks and SunPower

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

The idea behind Sunworks and SunPower 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.