Correlation Between Sun Life and UMWELTBANK

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

Diversification Opportunities for Sun Life and UMWELTBANK

0.76

Correlation Coefficient

Sun Life  UMWELTBANK

Poor diversification

The 3 months correlation between Sun and UMWELTBANK is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of Sun Life i.e., Sun Life and UMWELTBANK go up and down completely randomly.

Pair Corralation between Sun Life and UMWELTBANK

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the UMWELTBANK. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 3.09 times less risky than UMWELTBANK. The stock trades about -0.14 of its potential returns per unit of risk. The UMWELTBANK is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  618.00  in UMWELTBANK on September 27, 2024 and sell it today you would lose (14.00) from holding UMWELTBANK or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sun Life Financial  vs.  UMWELTBANK

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 fragile basic indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UMWELTBANK

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking signals, UMWELTBANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and UMWELTBANK

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

The idea behind Sun Life Financial and UMWELTBANK 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.