Correlation Between Link Real and Sun Life

Can any of the company-specific risk be diversified away by investing in both Link Real and Sun Life 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 Link Real and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Link Real Estate and Sun Life Financial, you can compare the effects of market volatilities on Link Real and Sun Life 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 Link Real with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Link Real and Sun Life.

Diversification Opportunities for Link Real and Sun Life

0.37

Correlation Coefficient

Link Real  Sun Life

Weak diversification

The 3 months correlation between Link and Sun is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Link Real Estate and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Link Real 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 Link Real Estate are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Link Real i.e., Link Real and Sun Life go up and down completely randomly.

Pair Corralation between Link Real and Sun Life

Assuming the 90 days horizon Link Real Estate is expected to generate 2.66 times more return on investment than Sun Life. However, Link Real is 2.66 times more volatile than Sun Life Financial. It trades about 0.04 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.14 per unit of risk. If you would invest  440.00  in Link Real Estate on November 29, 2024 and sell it today you would earn a total of  18.00  from holding Link Real Estate or generate 4.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.88%
Values	Daily Returns

Link Real Estate  vs.  Sun Life Financial

Link Real Estate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Link Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Link Real may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Link Real and Sun Life

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

The idea behind Link Real Estate and Sun Life Financial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.