Correlation Between Sun Life and Texas Roadhouse

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

Diversification Opportunities for Sun Life and Texas Roadhouse

0.73

Correlation Coefficient

Sun Life  Texas Roadhouse

Poor diversification

The 3 months correlation between Sun and Texas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of Sun Life i.e., Sun Life and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Sun Life and Texas Roadhouse

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.46 times more return on investment than Texas Roadhouse. However, Sun Life Financial is 2.19 times less risky than Texas Roadhouse. It trades about -0.06 of its potential returns per unit of risk. Texas Roadhouse is currently generating about -0.12 per unit of risk. If you would invest  6,004  in Sun Life Financial on September 19, 2024 and sell it today you would lose (53.00) from holding Sun Life Financial or give up 0.88% of portfolio value over 90 days.

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

Sun Life Financial  vs.  Texas Roadhouse

Sun Life Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 8 (%) 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.

Texas Roadhouse

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Roadhouse are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Texas Roadhouse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sun Life and Texas Roadhouse

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

The idea behind Sun Life Financial and Texas Roadhouse 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.