Correlation Between Sun Life and Nextgen Healthcare

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

Diversification Opportunities for Sun Life and Nextgen Healthcare

SunNextgenDiversified AwaySunNextgenDiversified Away100%
-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sun and Nextgen is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Nextgen Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextgen Healthcare 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 Nextgen Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextgen Healthcare has no effect on the direction of Sun Life i.e., Sun Life and Nextgen Healthcare go up and down completely randomly.

Pair Corralation between Sun Life and Nextgen Healthcare

If you would invest  5,644  in Sun Life Financial on October 16, 2024 and sell it today you would earn a total of  79.00  from holding Sun Life Financial or generate 1.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy1.64%
ValuesDaily Returns

Sun Life Financial  vs.  Nextgen Healthcare

 Performance 
JavaScript chart by amCharts 3.21.15NovDec -10-50510
JavaScript chart by amCharts 3.21.15SLF NXGN
       Timeline  
Sun Life Financial 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 2 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan555657585960616263
Nextgen Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nextgen Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Nextgen Healthcare is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Sun Life and Nextgen Healthcare Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.9-2.17-1.44-0.710.00.721.462.192.93 0.10.20.30.4
JavaScript chart by amCharts 3.21.15SLF NXGN
       Returns  

Pair Trading with Sun Life and Nextgen Healthcare

The main advantage of trading using opposite Sun Life and Nextgen Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Nextgen Healthcare 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 Nextgen Healthcare will offset losses from the drop in Nextgen Healthcare's long position.
The idea behind Sun Life Financial and Nextgen Healthcare 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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