Correlation Between SUN LIFE and Scandinavian Tobacco

Can any of the company-specific risk be diversified away by investing in both SUN LIFE and Scandinavian Tobacco 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 Scandinavian Tobacco 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 Scandinavian Tobacco Group, you can compare the effects of market volatilities on SUN LIFE and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN LIFE and Scandinavian Tobacco.

Diversification Opportunities for SUN LIFE and Scandinavian Tobacco

-0.86

Correlation Coefficient

SUN LIFE  Scandinavian Tobacco

Pay attention - limited upside

The 3 months correlation between SUN and Scandinavian is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of SUN LIFE i.e., SUN LIFE and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between SUN LIFE and Scandinavian Tobacco

Assuming the 90 days trading horizon SUN LIFE is expected to generate 3.9 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, SUN LIFE FINANCIAL is 3.69 times less risky than Scandinavian Tobacco. It trades about 0.06 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  409.00  in Scandinavian Tobacco Group on October 4, 2024 and sell it today you would earn a total of  873.00  from holding Scandinavian Tobacco Group or generate 213.45% return on investment over 90 days.

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

SUN LIFE FINANCIAL  vs.  Scandinavian Tobacco Group

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. In spite of rather fragile technical and fundamental indicators, SUN LIFE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SUN LIFE and Scandinavian Tobacco

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

The idea behind SUN LIFE FINANCIAL and Scandinavian Tobacco Group 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.