Correlation Between Sun Life and Western Acquisition

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

Diversification Opportunities for Sun Life and Western Acquisition

-0.25

Correlation Coefficient

Sun Life  Western Acquisition

Very good diversification

The 3 months correlation between Sun and Western is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Sun Life i.e., Sun Life and Western Acquisition go up and down completely randomly.

Pair Corralation between Sun Life and Western Acquisition

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.47 times more return on investment than Western Acquisition. However, Sun Life Financial is 2.14 times less risky than Western Acquisition. It trades about 0.08 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.03 per unit of risk. If you would invest  5,632  in Sun Life Financial on September 22, 2024 and sell it today you would earn a total of  260.00  from holding Sun Life Financial or generate 4.62% return on investment over 90 days.

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

Sun Life Financial  vs.  Western Acquisition Ventures

Sun Life Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 6 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sun Life and Western Acquisition

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

The idea behind Sun Life Financial and Western Acquisition Ventures 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.