Correlation Between Sun Life and Goosehead Insurance

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

Diversification Opportunities for Sun Life and Goosehead Insurance

-0.63

Correlation Coefficient

Sun Life  Goosehead Insurance

Excellent diversification

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

Pair Corralation between Sun Life and Goosehead Insurance

Considering the 90-day investment horizon Sun Life Financial is expected to under-perform the Goosehead Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 2.46 times less risky than Goosehead Insurance. The stock trades about -0.03 of its potential returns per unit of risk. The Goosehead Insurance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,850  in Goosehead Insurance on December 28, 2024 and sell it today you would earn a total of  1,990  from holding Goosehead Insurance or generate 20.2% 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.  Goosehead Insurance

Sun Life Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Goosehead Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goosehead Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical indicators, Goosehead Insurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Goosehead Insurance

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

The idea behind Sun Life Financial and Goosehead Insurance 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..