Correlation Between SUN LIFE and FIRST SAVINGS

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

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

Diversification Opportunities for SUN LIFE and FIRST SAVINGS

0.66

Correlation Coefficient

SUN LIFE  FIRST SAVINGS

Poor diversification

The 3 months correlation between SUN and FIRST is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and FIRST SAVINGS FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SAVINGS FINL and SUN LIFE 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 SUN LIFE FINANCIAL are associated (or correlated) with FIRST SAVINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SAVINGS FINL has no effect on the direction of SUN LIFE i.e., SUN LIFE and FIRST SAVINGS go up and down completely randomly.

Pair Corralation between SUN LIFE and FIRST SAVINGS

Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to under-perform the FIRST SAVINGS. But the stock apears to be less risky and, when comparing its historical volatility, SUN LIFE FINANCIAL is 1.96 times less risky than FIRST SAVINGS. The stock trades about -0.1 of its potential returns per unit of risk. The FIRST SAVINGS FINL is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,224  in FIRST SAVINGS FINL on December 20, 2024 and sell it today you would lose (104.00) from holding FIRST SAVINGS FINL or give up 4.68% of portfolio value over 90 days.

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

SUN LIFE FINANCIAL  vs.  FIRST SAVINGS FINL

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 unsteady 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.

FIRST SAVINGS FINL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SUN LIFE and FIRST SAVINGS

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

The idea behind SUN LIFE FINANCIAL and FIRST SAVINGS FINL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.