Correlation Between Sun Lif and Foraco International

Can any of the company-specific risk be diversified away by investing in both Sun Lif and Foraco International 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 Foraco International 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 Foraco International SA, you can compare the effects of market volatilities on Sun Lif and Foraco International 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 Foraco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Lif and Foraco International.

Diversification Opportunities for Sun Lif and Foraco International

-0.13

Correlation Coefficient

Sun Lif  Foraco International

Good diversification

The 3 months correlation between Sun and Foraco is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International 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 Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Sun Lif i.e., Sun Lif and Foraco International go up and down completely randomly.

Pair Corralation between Sun Lif and Foraco International

Assuming the 90 days trading horizon Sun Lif Non is expected to generate 0.39 times more return on investment than Foraco International. However, Sun Lif Non is 2.59 times less risky than Foraco International. It trades about 0.09 of its potential returns per unit of risk. Foraco International SA is currently generating about -0.05 per unit of risk. If you would invest  1,909  in Sun Lif Non on December 30, 2024 and sell it today you would earn a total of  136.00  from holding Sun Lif Non or generate 7.12% return on investment over 90 days.

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

Sun Lif Non  vs.  Foraco International SA

Sun Lif Non

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Sun Lif may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Foraco International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foraco International SA 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sun Lif and Foraco International

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

The idea behind Sun Lif Non and Foraco International SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.