Correlation Between Radcom and Sun Life

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

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

Diversification Opportunities for Radcom and Sun Life

0.81

Correlation Coefficient

Radcom  Sun Life

Very poor diversification

The 3 months correlation between Radcom and Sun is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Radcom 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 Radcom 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 Radcom 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 Radcom i.e., Radcom and Sun Life go up and down completely randomly.

Pair Corralation between Radcom and Sun Life

Given the investment horizon of 90 days Radcom is expected to generate 4.82 times more return on investment than Sun Life. However, Radcom is 4.82 times more volatile than Sun Life Financial. It trades about 0.01 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.4 per unit of risk. If you would invest  1,219  in Radcom on October 6, 2024 and sell it today you would lose (4.00) from holding Radcom or give up 0.33% of portfolio value over 90 days.

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

Radcom  vs.  Sun Life Financial

Radcom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Sun Life Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 5 (%) 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 Radcom and Sun Life

The main advantage of trading using opposite Radcom and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.