Correlation Between Pekin Life and Sun Life

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

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

Diversification Opportunities for Pekin Life and Sun Life

0.84

Correlation Coefficient

Pekin Life  Sun Life

Very poor diversification

The 3 months correlation between Pekin and Sun is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance 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 Pekin 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 Pekin Life Insurance 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 Pekin Life i.e., Pekin Life and Sun Life go up and down completely randomly.

Pair Corralation between Pekin Life and Sun Life

Given the investment horizon of 90 days Pekin Life Insurance is expected to generate 0.63 times more return on investment than Sun Life. However, Pekin Life Insurance is 1.6 times less risky than Sun Life. It trades about 0.23 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.06 per unit of risk. If you would invest  1,152  in Pekin Life Insurance on September 16, 2024 and sell it today you would earn a total of  24.00  from holding Pekin Life Insurance or generate 2.08% return on investment over 90 days.

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

Pekin Life Insurance  vs.  Sun Life Financial

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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

Pair Trading with Pekin Life and Sun Life

The main advantage of trading using opposite Pekin Life and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pekin Life 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 Pekin Life Insurance 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.