Correlation Between Sun Life and Enstar Group

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

Diversification Opportunities for Sun Life and Enstar Group

0.32

Correlation Coefficient

Sun Life  Enstar Group

Weak diversification

The 3 months correlation between Sun and Enstar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Enstar Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enstar Group 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 Enstar Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enstar Group Limited has no effect on the direction of Sun Life i.e., Sun Life and Enstar Group go up and down completely randomly.

Pair Corralation between Sun Life and Enstar Group

Considering the 90-day investment horizon Sun Life Financial is expected to generate 2.29 times more return on investment than Enstar Group. However, Sun Life is 2.29 times more volatile than Enstar Group Limited. It trades about 0.23 of its potential returns per unit of risk. Enstar Group Limited is currently generating about -0.01 per unit of risk. If you would invest  5,398  in Sun Life Financial on August 30, 2024 and sell it today you would earn a total of  694.00  from holding Sun Life Financial or generate 12.86% return on investment over 90 days.

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

Sun Life Financial  vs.  Enstar Group Limited

Sun Life Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 18 (%) 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 December 2024.

Enstar Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enstar Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Enstar Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sun Life and Enstar Group

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

The idea behind Sun Life Financial and Enstar Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.