Correlation Between Sun Life and Royalty Management

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

Diversification Opportunities for Sun Life and Royalty Management

0.18

Correlation Coefficient

Sun Life  Royalty Management

Average diversification

The 3 months correlation between Sun and Royalty is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management 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 Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Sun Life i.e., Sun Life and Royalty Management go up and down completely randomly.

Pair Corralation between Sun Life and Royalty Management

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.17 times more return on investment than Royalty Management. However, Sun Life Financial is 5.95 times less risky than Royalty Management. It trades about 0.06 of its potential returns per unit of risk. Royalty Management Holding is currently generating about -0.04 per unit of risk. If you would invest  4,574  in Sun Life Financial on September 27, 2024 and sell it today you would earn a total of  1,361  from holding Sun Life Financial or generate 29.76% return on investment over 90 days.

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

Sun Life Financial  vs.  Royalty Management Holding

Sun Life Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 5 (%) 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.

Royalty Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Management Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Royalty Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Royalty Management

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

The idea behind Sun Life Financial and Royalty Management Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.