Correlation Between Sun Lif and Freehold Royalties

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

Diversification Opportunities for Sun Lif and Freehold Royalties

-0.3

Correlation Coefficient

Sun Lif  Freehold Royalties

Very good diversification

The 3 months correlation between Sun and Freehold is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Sun Lif i.e., Sun Lif and Freehold Royalties go up and down completely randomly.

Pair Corralation between Sun Lif and Freehold Royalties

Assuming the 90 days trading horizon Sun Lif Non is expected to under-perform the Freehold Royalties. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Lif Non is 1.28 times less risky than Freehold Royalties. The preferred stock trades about -0.07 of its potential returns per unit of risk. The Freehold Royalties is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,297  in Freehold Royalties on September 4, 2024 and sell it today you would earn a total of  82.00  from holding Freehold Royalties or generate 6.32% 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.  Freehold Royalties

Sun Lif Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Lif Non has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sun Lif is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Freehold Royalties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Freehold Royalties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sun Lif and Freehold Royalties

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

The idea behind Sun Lif Non and Freehold Royalties 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.