Correlation Between 40414LAM1 and Sun Life

Can any of the company-specific risk be diversified away by investing in both 40414LAM1 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 40414LAM1 and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HCP INC 34 and Sun Life Financial, you can compare the effects of market volatilities on 40414LAM1 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 40414LAM1 with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of 40414LAM1 and Sun Life.

Diversification Opportunities for 40414LAM1 and Sun Life

-0.31

Correlation Coefficient

40414LAM1  Sun Life

Very good diversification

The 3 months correlation between 40414LAM1 and Sun is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding HCP INC 34 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 40414LAM1 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 HCP INC 34 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 40414LAM1 i.e., 40414LAM1 and Sun Life go up and down completely randomly.

Pair Corralation between 40414LAM1 and Sun Life

Assuming the 90 days trading horizon HCP INC 34 is expected to under-perform the Sun Life. But the bond apears to be less risky and, when comparing its historical volatility, HCP INC 34 is 1.31 times less risky than Sun Life. The bond trades about -0.03 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,459  in Sun Life Financial on September 5, 2024 and sell it today you would earn a total of  670.00  from holding Sun Life Financial or generate 12.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.06%
Values	Daily Returns

HCP INC 34  vs.  Sun Life Financial

HCP INC 34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCP INC 34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 40414LAM1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sun Life Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 40414LAM1 and Sun Life

The main advantage of trading using opposite 40414LAM1 and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 40414LAM1 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 HCP INC 34 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.