Correlation Between Sun Life and Western Asset

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

Diversification Opportunities for Sun Life and Western Asset

-0.41

Correlation Coefficient

Sun Life  Western Asset

Very good diversification

The 3 months correlation between Sun and Western is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of Sun Life i.e., Sun Life and Western Asset go up and down completely randomly.

Pair Corralation between Sun Life and Western Asset

Considering the 90-day investment horizon Sun Life Financial is expected to generate 2.1 times more return on investment than Western Asset. However, Sun Life is 2.1 times more volatile than Western Asset Investment. It trades about 0.13 of its potential returns per unit of risk. Western Asset Investment is currently generating about 0.02 per unit of risk. If you would invest  4,894  in Sun Life Financial on September 24, 2024 and sell it today you would earn a total of  998.00  from holding Sun Life Financial or generate 20.39% 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.  Western Asset Investment

Sun Life Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 4 (%) 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.

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Sun Life and Western Asset

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

The idea behind Sun Life Financial and Western Asset Investment 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.