Correlation Between Primo Brands and Sun Life

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

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

Diversification Opportunities for Primo Brands and Sun Life

0.79

Correlation Coefficient

Primo Brands  Sun Life

Poor diversification

The 3 months correlation between Primo and Sun is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands 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 Primo Brands 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 Primo Brands 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 Primo Brands i.e., Primo Brands and Sun Life go up and down completely randomly.

Pair Corralation between Primo Brands and Sun Life

Given the investment horizon of 90 days Primo Brands is expected to generate 1.56 times more return on investment than Sun Life. However, Primo Brands is 1.56 times more volatile than Sun Life Financial. It trades about 0.1 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.07 per unit of risk. If you would invest  1,461  in Primo Brands on September 14, 2024 and sell it today you would earn a total of  1,679  from holding Primo Brands or generate 114.92% return on investment over 90 days.

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

Primo Brands  vs.  Sun Life Financial

Primo Brands

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Sun Life Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 11 (%) 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 Primo Brands and Sun Life

The main advantage of trading using opposite Primo Brands and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primo Brands 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 Primo Brands 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.