Correlation Between Sunrun and Advanced Energy

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

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

Diversification Opportunities for Sunrun and Advanced Energy

0.73

Correlation Coefficient

Sunrun  Advanced Energy

Poor diversification

The 3 months correlation between Sunrun and Advanced is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sunrun Inc and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Sunrun 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 Sunrun Inc are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Sunrun i.e., Sunrun and Advanced Energy go up and down completely randomly.

Pair Corralation between Sunrun and Advanced Energy

Considering the 90-day investment horizon Sunrun Inc is expected to generate 2.54 times more return on investment than Advanced Energy. However, Sunrun is 2.54 times more volatile than Advanced Energy Industries. It trades about 0.03 of its potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.01 per unit of risk. If you would invest  1,183  in Sunrun Inc on February 5, 2024 and sell it today you would earn a total of  7.00  from holding Sunrun Inc or generate 0.59% return on investment over 90 days.

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

Sunrun Inc  vs.  Advanced Energy Industries

Sunrun Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Advanced Energy Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Energy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Advanced Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sunrun and Advanced Energy

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

The idea behind Sunrun Inc and Advanced Energy Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.