Correlation Between Allhome Corp and Sun Life

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

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

Diversification Opportunities for Allhome Corp and Sun Life

0.05

Correlation Coefficient

Allhome Corp  Sun Life

Significant diversification

The 3 months correlation between Allhome and Sun is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Allhome Corp 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 Allhome Corp 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 Allhome Corp 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 Allhome Corp i.e., Allhome Corp and Sun Life go up and down completely randomly.

Pair Corralation between Allhome Corp and Sun Life

Assuming the 90 days trading horizon Allhome Corp is expected to under-perform the Sun Life. But the stock apears to be less risky and, when comparing its historical volatility, Allhome Corp is 2.25 times less risky than Sun Life. The stock trades about -0.02 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  296,978  in Sun Life Financial on September 4, 2024 and sell it today you would earn a total of  62,822  from holding Sun Life Financial or generate 21.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Allhome Corp  vs.  Sun Life Financial

Allhome Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sun Life Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 8 (%) 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 Allhome Corp and Sun Life

The main advantage of trading using opposite Allhome Corp and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allhome Corp 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 Allhome Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.