Correlation Between Sun Life and Eversource Energy

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

Diversification Opportunities for Sun Life and Eversource Energy

-0.4

Correlation Coefficient

Sun Life  Eversource Energy

Very good diversification

The 3 months correlation between Sun and Eversource is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Sun Life i.e., Sun Life and Eversource Energy go up and down completely randomly.

Pair Corralation between Sun Life and Eversource Energy

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the Eversource Energy. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.26 times less risky than Eversource Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Eversource Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,388  in Eversource Energy on December 29, 2024 and sell it today you would earn a total of  162.00  from holding Eversource Energy or generate 3.01% return on investment over 90 days.

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

Sun Life Financial  vs.  Eversource Energy

Sun Life Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Eversource Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eversource Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Eversource Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sun Life and Eversource Energy

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

The idea behind Sun Life Financial and Eversource Energy 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.