Correlation Between SUN LIFE and CARSALESCOM

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

Diversification Opportunities for SUN LIFE and CARSALESCOM

0.48

Correlation Coefficient

SUN LIFE  CARSALESCOM

Very weak diversification

The 3 months correlation between SUN and CARSALESCOM is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of SUN LIFE i.e., SUN LIFE and CARSALESCOM go up and down completely randomly.

Pair Corralation between SUN LIFE and CARSALESCOM

Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to generate 0.41 times more return on investment than CARSALESCOM. However, SUN LIFE FINANCIAL is 2.47 times less risky than CARSALESCOM. It trades about -0.31 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.23 per unit of risk. If you would invest  5,850  in SUN LIFE FINANCIAL on October 10, 2024 and sell it today you would lose (200.00) from holding SUN LIFE FINANCIAL or give up 3.42% of portfolio value over 90 days.

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

SUN LIFE FINANCIAL  vs.  CARSALESCOM

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.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SUN LIFE and CARSALESCOM

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

The idea behind SUN LIFE FINANCIAL and CARSALESCOM 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.