Correlation Between Singapore Airlines and Sun Life

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

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

Diversification Opportunities for Singapore Airlines and Sun Life

-0.04

Correlation Coefficient

Singapore Airlines  Sun Life

Good diversification

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

Pair Corralation between Singapore Airlines and Sun Life

Assuming the 90 days trading horizon Singapore Airlines is expected to generate 4.35 times less return on investment than Sun Life. In addition to that, Singapore Airlines is 1.12 times more volatile than Sun Life Financial. It trades about 0.05 of its total potential returns per unit of risk. Sun Life Financial is currently generating about 0.23 per unit of volatility. If you would invest  4,977  in Sun Life Financial on September 13, 2024 and sell it today you would earn a total of  823.00  from holding Sun Life Financial or generate 16.54% return on investment over 90 days.

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

Singapore Airlines Limited  vs.  Sun Life Financial

Singapore Airlines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Life Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Airlines and Sun Life

The main advantage of trading using opposite Singapore Airlines and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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 Singapore Airlines Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.