Correlation Between Hua Hong and SUN LIFE

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

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

Diversification Opportunities for Hua Hong and SUN LIFE

-0.87

Correlation Coefficient

Hua Hong  SUN LIFE

Pay attention - limited upside

The 3 months correlation between Hua and SUN is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and SUN LIFE FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUN LIFE FINANCIAL and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with SUN LIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUN LIFE FINANCIAL has no effect on the direction of Hua Hong i.e., Hua Hong and SUN LIFE go up and down completely randomly.

Pair Corralation between Hua Hong and SUN LIFE

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 3.76 times more return on investment than SUN LIFE. However, Hua Hong is 3.76 times more volatile than SUN LIFE FINANCIAL. It trades about 0.22 of its potential returns per unit of risk. SUN LIFE FINANCIAL is currently generating about -0.09 per unit of risk. If you would invest  254.00  in Hua Hong Semiconductor on December 19, 2024 and sell it today you would earn a total of  194.00  from holding Hua Hong Semiconductor or generate 76.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Hua Hong Semiconductor  vs.  SUN LIFE FINANCIAL

Hua Hong Semiconductor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

SUN LIFE FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUN LIFE FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Hua Hong and SUN LIFE

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

The idea behind Hua Hong Semiconductor and SUN LIFE FINANCIAL 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.