Correlation Between Sun Life and NN Group

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

Diversification Opportunities for Sun Life and NN Group

-0.53

Correlation Coefficient

Sun Life  NN Group

Excellent diversification

The 3 months correlation between Sun and NNGPF is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV 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 NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of Sun Life i.e., Sun Life and NN Group go up and down completely randomly.

Pair Corralation between Sun Life and NN Group

Considering the 90-day investment horizon Sun Life Financial is expected to under-perform the NN Group. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.29 times less risky than NN Group. The stock trades about -0.03 of its potential returns per unit of risk. The NN Group NV is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,381  in NN Group NV on December 28, 2024 and sell it today you would earn a total of  1,183  from holding NN Group NV or generate 27.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Sun Life Financial  vs.  NN Group NV

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.

NN Group NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NN Group NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NN Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and NN Group

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

The idea behind Sun Life Financial and NN Group NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.