Correlation Between Sun Life and Ipsen SA

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

Diversification Opportunities for Sun Life and Ipsen SA

-0.72

Correlation Coefficient

Sun Life  Ipsen SA

Pay attention - limited upside

The 3 months correlation between Sun and Ipsen is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen 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 Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Sun Life i.e., Sun Life and Ipsen SA go up and down completely randomly.

Pair Corralation between Sun Life and Ipsen SA

Assuming the 90 days horizon Sun Life Financial is expected to generate 0.72 times more return on investment than Ipsen SA. However, Sun Life Financial is 1.4 times less risky than Ipsen SA. It trades about 0.1 of its potential returns per unit of risk. Ipsen SA is currently generating about 0.02 per unit of risk. If you would invest  4,295  in Sun Life Financial on September 23, 2024 and sell it today you would earn a total of  1,355  from holding Sun Life Financial or generate 31.55% 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.  Ipsen SA

Sun Life Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 14 (%) 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 January 2025.

Ipsen SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sun Life and Ipsen SA

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

The idea behind Sun Life Financial and Ipsen 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.