Correlation Between Sun Life and Mitsui Chemicals

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

Diversification Opportunities for Sun Life and Mitsui Chemicals

-0.42

Correlation Coefficient

Sun Life  Mitsui Chemicals

Very good diversification

The 3 months correlation between Sun and Mitsui is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Sun Life i.e., Sun Life and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Sun Life and Mitsui Chemicals

Assuming the 90 days horizon Sun Life Financial is expected to generate 0.38 times more return on investment than Mitsui Chemicals. However, Sun Life Financial is 2.6 times less risky than Mitsui Chemicals. It trades about -0.24 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.16 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 (150.00) from holding Sun Life Financial or give up 2.56% 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.  Mitsui Chemicals

Sun Life Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sun Life and Mitsui Chemicals

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

The idea behind Sun Life Financial and Mitsui Chemicals 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.