Correlation Between Japan Petroleum and Sun Life

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

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

Diversification Opportunities for Japan Petroleum and Sun Life

-0.37

Correlation Coefficient

Japan Petroleum  Sun Life

Very good diversification

The 3 months correlation between Japan and Sun is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration 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 Japan Petroleum 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 Japan Petroleum Exploration 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 Japan Petroleum i.e., Japan Petroleum and Sun Life go up and down completely randomly.

Pair Corralation between Japan Petroleum and Sun Life

Assuming the 90 days horizon Japan Petroleum Exploration is expected to under-perform the Sun Life. In addition to that, Japan Petroleum is 1.26 times more volatile than Sun Life Financial. It trades about 0.0 of its total potential returns per unit of risk. Sun Life Financial is currently generating about 0.13 per unit of volatility. If you would invest  5,175  in Sun Life Financial on October 12, 2024 and sell it today you would earn a total of  475.00  from holding Sun Life Financial or generate 9.18% return on investment over 90 days.

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

Japan Petroleum Exploration  vs.  Sun Life Financial

Japan Petroleum Expl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Petroleum Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Life Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Japan Petroleum and Sun Life

The main advantage of trading using opposite Japan Petroleum and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Petroleum 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 Japan Petroleum Exploration 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..