Correlation Between SUN LIFE and Johnson Johnson

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

Diversification Opportunities for SUN LIFE and Johnson Johnson

-0.51

Correlation Coefficient

SUN LIFE  Johnson Johnson

Excellent diversification

The 3 months correlation between SUN and Johnson is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of SUN LIFE i.e., SUN LIFE and Johnson Johnson go up and down completely randomly.

Pair Corralation between SUN LIFE and Johnson Johnson

Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to under-perform the Johnson Johnson. But the stock apears to be less risky and, when comparing its historical volatility, SUN LIFE FINANCIAL is 1.31 times less risky than Johnson Johnson. The stock trades about -0.24 of its potential returns per unit of risk. The Johnson Johnson is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  14,224  in Johnson Johnson on October 9, 2024 and sell it today you would lose (358.00) from holding Johnson Johnson or give up 2.52% of portfolio value over 90 days.

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

SUN LIFE FINANCIAL  vs.  Johnson Johnson

SUN LIFE FINANCIAL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SUN LIFE FINANCIAL are ranked lower than 11 (%) 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.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SUN LIFE and Johnson Johnson

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

The idea behind SUN LIFE FINANCIAL and Johnson Johnson 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..