Correlation Between Sun Lif and CHEVRON CDR

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

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

Diversification Opportunities for Sun Lif and CHEVRON CDR

0.18

Correlation Coefficient

Sun Lif  CHEVRON CDR

Average diversification

The 3 months correlation between Sun and CHEVRON is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR and Sun Lif 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 Lif Non are associated (or correlated) with CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of Sun Lif i.e., Sun Lif and CHEVRON CDR go up and down completely randomly.

Pair Corralation between Sun Lif and CHEVRON CDR

Assuming the 90 days trading horizon Sun Lif Non is expected to generate 0.69 times more return on investment than CHEVRON CDR. However, Sun Lif Non is 1.45 times less risky than CHEVRON CDR. It trades about 0.2 of its potential returns per unit of risk. CHEVRON CDR is currently generating about -0.02 per unit of risk. If you would invest  1,881  in Sun Lif Non on December 1, 2024 and sell it today you would earn a total of  227.00  from holding Sun Lif Non or generate 12.07% return on investment over 90 days.

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

Sun Lif Non  vs.  CHEVRON CDR

Sun Lif Non

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Sun Lif may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CHEVRON CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHEVRON CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CHEVRON CDR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sun Lif and CHEVRON CDR

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

The idea behind Sun Lif Non and CHEVRON CDR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.