Correlation Between Equitable Holdings and Sun Life

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

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

Diversification Opportunities for Equitable Holdings and Sun Life

0.35

Correlation Coefficient

Equitable Holdings  Sun Life

Weak diversification

The 3 months correlation between Equitable and Sun is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings i.e., Equitable Holdings and Sun Life go up and down completely randomly.

Pair Corralation between Equitable Holdings and Sun Life

Assuming the 90 days trading horizon Equitable Holdings is expected to generate 0.41 times more return on investment than Sun Life. However, Equitable Holdings is 2.45 times less risky than Sun Life. It trades about -0.15 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.18 per unit of risk. If you would invest  1,885  in Equitable Holdings on November 28, 2024 and sell it today you would lose (42.00) from holding Equitable Holdings or give up 2.23% of portfolio value over 90 days.

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

Equitable Holdings  vs.  Sun Life Financial

Equitable Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Equitable Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Equitable Holdings and Sun Life

The main advantage of trading using opposite Equitable Holdings and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equitable Holdings 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 Equitable Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.