Correlation Between Sun Life and Heineken Holding

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

Diversification Opportunities for Sun Life and Heineken Holding

-0.92

Correlation Coefficient

Sun Life  Heineken Holding

Pay attention - limited upside

The 3 months correlation between Sun and Heineken is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding 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 Heineken Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Holding has no effect on the direction of Sun Life i.e., Sun Life and Heineken Holding go up and down completely randomly.

Pair Corralation between Sun Life and Heineken Holding

Assuming the 90 days horizon Sun Life Financial is expected to generate 0.99 times more return on investment than Heineken Holding. However, Sun Life Financial is 1.01 times less risky than Heineken Holding. It trades about 0.27 of its potential returns per unit of risk. Heineken Holding NV is currently generating about -0.15 per unit of risk. If you would invest  4,889  in Sun Life Financial on September 4, 2024 and sell it today you would earn a total of  961.00  from holding Sun Life Financial or generate 19.66% 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.  Heineken Holding NV

Sun Life Financial

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Life reported solid returns over the last few months and may actually be approaching a breakup point.

Heineken Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sun Life and Heineken Holding

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

The idea behind Sun Life Financial and Heineken Holding NV 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.