Correlation Between Sun Life and Dream Residential

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

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

Diversification Opportunities for Sun Life and Dream Residential

-0.66

Correlation Coefficient

Sun Life  Dream Residential

Excellent diversification

The 3 months correlation between Sun and Dream is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Non and Dream Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Residential Real and Sun 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 Sun Life Non are associated (or correlated) with Dream Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Residential Real has no effect on the direction of Sun Life i.e., Sun Life and Dream Residential go up and down completely randomly.

Pair Corralation between Sun Life and Dream Residential

Assuming the 90 days trading horizon Sun Life Non is expected to generate 0.29 times more return on investment than Dream Residential. However, Sun Life Non is 3.49 times less risky than Dream Residential. It trades about 0.35 of its potential returns per unit of risk. Dream Residential Real is currently generating about -0.08 per unit of risk. If you would invest  1,610  in Sun Life Non on October 23, 2024 and sell it today you would earn a total of  216.00  from holding Sun Life Non or generate 13.42% return on investment over 90 days.

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

Sun Life Non  vs.  Dream Residential Real

Sun Life Non

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Non are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Sun Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Dream Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sun Life and Dream Residential

The main advantage of trading using opposite Sun Life and Dream Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Dream Residential 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 Dream Residential will offset losses from the drop in Dream Residential's long position.

The idea behind Sun Life Non and Dream Residential Real 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.