Correlation Between GT Capital and Sun Life

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

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

Diversification Opportunities for GT Capital and Sun Life

-0.6

Correlation Coefficient

GT Capital  Sun Life

Excellent diversification

The 3 months correlation between GTCAP and Sun is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital 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 GT Capital 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 GT Capital 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 GT Capital i.e., GT Capital and Sun Life go up and down completely randomly.

Pair Corralation between GT Capital and Sun Life

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the Sun Life. But the stock apears to be less risky and, when comparing its historical volatility, GT Capital Holdings is 2.21 times less risky than Sun Life. The stock trades about -0.05 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  292,029  in Sun Life Financial on September 12, 2024 and sell it today you would earn a total of  65,971  from holding Sun Life Financial or generate 22.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	82.54%
Values	Daily Returns

GT Capital Holdings  vs.  Sun Life Financial

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, GT Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Sun Life Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sun Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GT Capital and Sun Life

The main advantage of trading using opposite GT Capital and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GT Capital 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 GT Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.