Correlation Between SUN LIFE and ArcelorMittal

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

Diversification Opportunities for SUN LIFE and ArcelorMittal

-0.7

Correlation Coefficient

SUN LIFE  ArcelorMittal

Excellent diversification

The 3 months correlation between SUN and ArcelorMittal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of SUN LIFE i.e., SUN LIFE and ArcelorMittal go up and down completely randomly.

Pair Corralation between SUN LIFE and ArcelorMittal

Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to under-perform the ArcelorMittal. But the stock apears to be less risky and, when comparing its historical volatility, SUN LIFE FINANCIAL is 2.5 times less risky than ArcelorMittal. The stock trades about -0.09 of its potential returns per unit of risk. The ArcelorMittal SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,212  in ArcelorMittal SA on December 22, 2024 and sell it today you would earn a total of  723.00  from holding ArcelorMittal SA or generate 32.69% return on investment over 90 days.

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

SUN LIFE FINANCIAL  vs.  ArcelorMittal SA

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 weak 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.

ArcelorMittal SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SUN LIFE and ArcelorMittal

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

The idea behind SUN LIFE FINANCIAL and ArcelorMittal SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.