Correlation Between Suncor Energy and Peabody Energy

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

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

Diversification Opportunities for Suncor Energy and Peabody Energy

0.4

Correlation Coefficient

Suncor Energy  Peabody Energy

Very weak diversification

The 3 months correlation between Suncor and Peabody is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy Corp and Suncor Energy 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 Suncor Energy are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of Suncor Energy i.e., Suncor Energy and Peabody Energy go up and down completely randomly.

Pair Corralation between Suncor Energy and Peabody Energy

Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 1.39 times less return on investment than Peabody Energy. But when comparing it to its historical volatility, Suncor Energy is 2.58 times less risky than Peabody Energy. It trades about 0.19 of its potential returns per unit of risk. Peabody Energy Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,426  in Peabody Energy Corp on May 7, 2025 and sell it today you would earn a total of  295.00  from holding Peabody Energy Corp or generate 20.69% return on investment over 90 days.

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

Suncor Energy  vs.  Peabody Energy Corp

Suncor Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suncor Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Suncor Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Peabody Energy Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Peabody Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Peabody Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suncor Energy and Peabody Energy

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

The idea behind Suncor Energy and Peabody Energy Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.