Correlation Between Sun Life and ASX

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

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

Diversification Opportunities for Sun Life and ASX

-0.63

Correlation Coefficient

Sun Life  ASX

Excellent diversification

The 3 months correlation between Sun and ASX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited 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 Financial are associated (or correlated) with ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited has no effect on the direction of Sun Life i.e., Sun Life and ASX go up and down completely randomly.

Pair Corralation between Sun Life and ASX

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.43 times more return on investment than ASX. However, Sun Life Financial is 2.34 times less risky than ASX. It trades about 0.07 of its potential returns per unit of risk. ASX Limited is currently generating about -0.04 per unit of risk. If you would invest  5,697  in Sun Life Financial on October 7, 2024 and sell it today you would earn a total of  221.00  from holding Sun Life Financial or generate 3.88% return on investment over 90 days.

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

Sun Life Financial  vs.  ASX Limited

Sun Life Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ASX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ASX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sun Life and ASX

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

The idea behind Sun Life Financial and ASX Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..