Correlation Between Sun Life and Solar Alliance

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

Diversification Opportunities for Sun Life and Solar Alliance

0.64

Correlation Coefficient

Sun Life  Solar Alliance

Poor diversification

The 3 months correlation between Sun and Solar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy 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 Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of Sun Life i.e., Sun Life and Solar Alliance go up and down completely randomly.

Pair Corralation between Sun Life and Solar Alliance

If you would invest  1,998  in Sun Life Financial on September 10, 2024 and sell it today you would earn a total of  1.00  from holding Sun Life Financial or generate 0.05% return on investment over 90 days.

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

Sun Life Financial  vs.  Solar Alliance Energy

Sun Life Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Solar Alliance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Solar Alliance

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

The idea behind Sun Life Financial and Solar Alliance Energy 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.