Correlation Between Union Bank and Sun Life

Can any of the company-specific risk be diversified away by investing in both Union Bank and Sun Life 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 Union Bank and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Union Bank of and Sun Life Financial, you can compare the effects of market volatilities on Union Bank and Sun Life 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 Union Bank with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bank and Sun Life.

Diversification Opportunities for Union Bank and Sun Life

0.41

Correlation Coefficient

Union Bank  Sun Life

Very weak diversification

The 3 months correlation between Union and Sun is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Union Bank 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 Union Bank of are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Union Bank i.e., Union Bank and Sun Life go up and down completely randomly.

Pair Corralation between Union Bank and Sun Life

Assuming the 90 days trading horizon Union Bank of is expected to under-perform the Sun Life. But the stock apears to be less risky and, when comparing its historical volatility, Union Bank of is 2.63 times less risky than Sun Life. The stock trades about -0.02 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  299,946  in Sun Life Financial on December 28, 2024 and sell it today you would earn a total of  15,054  from holding Sun Life Financial or generate 5.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.97%
Values	Daily Returns

Union Bank of  vs.  Sun Life Financial

Union Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Union Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sun Life Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Union Bank and Sun Life

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

The idea behind Union Bank of and Sun Life Financial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.