Correlation Between Sun Life and Defence Therapeutics

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

Diversification Opportunities for Sun Life and Defence Therapeutics

-0.42

Correlation Coefficient

Sun Life  Defence Therapeutics

Very good diversification

The 3 months correlation between Sun and Defence is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Defence Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defence Therapeutics 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 Defence Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defence Therapeutics has no effect on the direction of Sun Life i.e., Sun Life and Defence Therapeutics go up and down completely randomly.

Pair Corralation between Sun Life and Defence Therapeutics

Considering the 90-day investment horizon Sun Life is expected to generate 1.02 times less return on investment than Defence Therapeutics. In addition to that, Sun Life is 1.48 times more volatile than Defence Therapeutics. It trades about 0.14 of its total potential returns per unit of risk. Defence Therapeutics is currently generating about 0.21 per unit of volatility. If you would invest  40.00  in Defence Therapeutics on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Defence Therapeutics or generate 2.5% return on investment over 90 days.

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

Sun Life Financial  vs.  Defence Therapeutics

Sun Life Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Defence Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defence Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Defence Therapeutics 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 Defence Therapeutics

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

The idea behind Sun Life Financial and Defence Therapeutics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.