Correlation Between Talon Metals and Sun Lif

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

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

Diversification Opportunities for Talon Metals and Sun Lif

0.44

Correlation Coefficient

Talon Metals  Sun Lif

Very weak diversification

The 3 months correlation between Talon and Sun is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Sun Lif Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Lif Non and Talon Metals 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 Talon Metals Corp are associated (or correlated) with Sun Lif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Lif Non has no effect on the direction of Talon Metals i.e., Talon Metals and Sun Lif go up and down completely randomly.

Pair Corralation between Talon Metals and Sun Lif

Assuming the 90 days trading horizon Talon Metals Corp is expected to generate 5.76 times more return on investment than Sun Lif. However, Talon Metals is 5.76 times more volatile than Sun Lif Non. It trades about 0.08 of its potential returns per unit of risk. Sun Lif Non is currently generating about 0.05 per unit of risk. If you would invest  8.00  in Talon Metals Corp on September 4, 2024 and sell it today you would earn a total of  0.50  from holding Talon Metals Corp or generate 6.25% return on investment over 90 days.

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

Talon Metals Corp  vs.  Sun Lif Non

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Talon Metals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sun Lif Non

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Talon Metals and Sun Lif

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

The idea behind Talon Metals Corp and Sun Lif Non 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.