Correlation Between Luxfer Holdings and Sun Life

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

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

Diversification Opportunities for Luxfer Holdings and Sun Life

0.66

Correlation Coefficient

Luxfer Holdings  Sun Life

Poor diversification

The 3 months correlation between Luxfer and Sun is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC 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 Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Sun Life go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Sun Life

Given the investment horizon of 90 days Luxfer Holdings is expected to generate 1.21 times less return on investment than Sun Life. In addition to that, Luxfer Holdings is 2.48 times more volatile than Sun Life Financial. It trades about 0.02 of its total potential returns per unit of risk. Sun Life Financial is currently generating about 0.07 per unit of volatility. If you would invest  4,222  in Sun Life Financial on September 18, 2024 and sell it today you would earn a total of  1,783  from holding Sun Life Financial or generate 42.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Luxfer Holdings PLC  vs.  Sun Life Financial

Luxfer Holdings PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Sun Life Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Luxfer Holdings and Sun Life

The main advantage of trading using opposite Luxfer Holdings and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings 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 Luxfer Holdings PLC 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.