Correlation Between Sun Life and Coca Cola

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

Diversification Opportunities for Sun Life and Coca Cola

-0.72

Correlation Coefficient

Sun Life  Coca Cola

Pay attention - limited upside

The 3 months correlation between Sun and Coca is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Sun Life i.e., Sun Life and Coca Cola go up and down completely randomly.

Pair Corralation between Sun Life and Coca Cola

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.99 times more return on investment than Coca Cola. However, Sun Life Financial is 1.01 times less risky than Coca Cola. It trades about 0.23 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.21 per unit of risk. If you would invest  5,486  in Sun Life Financial on September 4, 2024 and sell it today you would earn a total of  684.00  from holding Sun Life Financial or generate 12.47% return on investment over 90 days.

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

Sun Life Financial  vs.  The Coca Cola

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.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sun Life and Coca Cola

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

The idea behind Sun Life Financial and The Coca Cola 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.