Correlation Between Sun Life and Huaneng Power

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

Diversification Opportunities for Sun Life and Huaneng Power

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sun and Huaneng is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern 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 Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of Sun Life i.e., Sun Life and Huaneng Power go up and down completely randomly.

Pair Corralation between Sun Life and Huaneng Power

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the Huaneng Power. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 3.41 times less risky than Huaneng Power. The stock trades about -0.21 of its potential returns per unit of risk. The Huaneng Power International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Huaneng Power International on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Huaneng Power International or generate 6.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sun Life Financial  vs.  Huaneng Power International

 Performance 
       Timeline  
Sun Life Financial 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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. Despite nearly fragile basic indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Huaneng Power Intern 

Risk-Adjusted Performance

0 of 100

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

Sun Life and Huaneng Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Life and Huaneng Power

The main advantage of trading using opposite Sun Life and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power's long position.
The idea behind Sun Life Financial and Huaneng Power International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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