Correlation Between Sun Life and KEYCORP

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

Diversification Opportunities for Sun Life and KEYCORP

-0.33

Correlation Coefficient

Sun Life  KEYCORP

Very good diversification

The 3 months correlation between Sun and KEYCORP is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and KEYCORP MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MEDIUM TERM 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 KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MEDIUM TERM has no effect on the direction of Sun Life i.e., Sun Life and KEYCORP go up and down completely randomly.

Pair Corralation between Sun Life and KEYCORP

Considering the 90-day investment horizon Sun Life Financial is expected to generate 1.5 times more return on investment than KEYCORP. However, Sun Life is 1.5 times more volatile than KEYCORP MEDIUM TERM. It trades about 0.1 of its potential returns per unit of risk. KEYCORP MEDIUM TERM is currently generating about 0.06 per unit of risk. If you would invest  4,308  in Sun Life Financial on September 19, 2024 and sell it today you would earn a total of  1,508  from holding Sun Life Financial or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

Sun Life Financial  vs.  KEYCORP MEDIUM TERM

Sun Life Financial

Risk-Adjusted Performance

4 of 100

OK

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.

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sun Life and KEYCORP

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

The idea behind Sun Life Financial and KEYCORP MEDIUM TERM 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.