Correlation Between Nextgen Food and Sun Life

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

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

Diversification Opportunities for Nextgen Food and Sun Life

-0.04

Correlation Coefficient

Nextgen Food  Sun Life

Good diversification

The 3 months correlation between Nextgen and Sun is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nextgen Food Robotics 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 Nextgen Food 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 Nextgen Food Robotics 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 Nextgen Food i.e., Nextgen Food and Sun Life go up and down completely randomly.

Pair Corralation between Nextgen Food and Sun Life

Assuming the 90 days horizon Nextgen Food Robotics is expected to generate 45.68 times more return on investment than Sun Life. However, Nextgen Food is 45.68 times more volatile than Sun Life Financial. It trades about 0.05 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.05 per unit of risk. If you would invest  11.00  in Nextgen Food Robotics on October 25, 2024 and sell it today you would lose (7.25) from holding Nextgen Food Robotics or give up 65.91% of portfolio value over 90 days.

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

Nextgen Food Robotics  vs.  Sun Life Financial

Nextgen Food Robotics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextgen Food Robotics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Nextgen Food reported solid returns over the last few months and may actually be approaching a breakup point.

Sun Life Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nextgen Food and Sun Life

The main advantage of trading using opposite Nextgen Food and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextgen Food 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 Nextgen Food Robotics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.