Correlation Between Sun Life and Link Real

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

Diversification Opportunities for Sun Life and Link Real

-0.29

Correlation Coefficient

Sun Life  Link Real

Very good diversification

The 3 months correlation between Sun and Link is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Link Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Link Real Estate 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 Link Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Link Real Estate has no effect on the direction of Sun Life i.e., Sun Life and Link Real go up and down completely randomly.

Pair Corralation between Sun Life and Link Real

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.32 times more return on investment than Link Real. However, Sun Life Financial is 3.12 times less risky than Link Real. It trades about 0.23 of its potential returns per unit of risk. Link Real Estate is currently generating about -0.02 per unit of risk. If you would invest  5,428  in Sun Life Financial on September 2, 2024 and sell it today you would earn a total of  711.00  from holding Sun Life Financial or generate 13.1% return on investment over 90 days.

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

Sun Life Financial  vs.  Link Real Estate

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 January 2025.

Link Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sun Life and Link Real

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

The idea behind Sun Life Financial and Link Real Estate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.