Correlation Between Sun Life and USS

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

Diversification Opportunities for Sun Life and USS

0.63

Correlation Coefficient

Sun Life  USS

Poor diversification

The 3 months correlation between Sun and USS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Sun Life i.e., Sun Life and USS go up and down completely randomly.

Pair Corralation between Sun Life and USS

Assuming the 90 days horizon Sun Life Financial is expected to generate 0.81 times more return on investment than USS. However, Sun Life Financial is 1.24 times less risky than USS. It trades about -0.13 of its potential returns per unit of risk. USS Co is currently generating about -0.12 per unit of risk. If you would invest  5,766  in Sun Life Financial on September 23, 2024 and sell it today you would lose (116.00) from holding Sun Life Financial or give up 2.01% 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.  USS Co

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.

USS Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USS Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USS 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 USS

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

The idea behind Sun Life Financial and USS Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.