Correlation Between Sanlam and Unum

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

By analyzing existing cross correlation between Sanlam Ltd PK and Unum Group, you can compare the effects of market volatilities on Sanlam and Unum 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 Sanlam with a short position of Unum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanlam and Unum.

Diversification Opportunities for Sanlam and Unum

0.07

Correlation Coefficient

Sanlam  Unum

Significant diversification

The 3 months correlation between Sanlam and Unum is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sanlam Ltd PK and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group and Sanlam 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 Sanlam Ltd PK are associated (or correlated) with Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of Sanlam i.e., Sanlam and Unum go up and down completely randomly.

Pair Corralation between Sanlam and Unum

Assuming the 90 days horizon Sanlam is expected to generate 6.55 times less return on investment than Unum. But when comparing it to its historical volatility, Sanlam Ltd PK is 1.06 times less risky than Unum. It trades about 0.06 of its potential returns per unit of risk. Unum Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  5,469  in Unum Group on September 3, 2024 and sell it today you would earn a total of  2,221  from holding Unum Group or generate 40.61% return on investment over 90 days.

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

Sanlam Ltd PK  vs.  Unum Group

Sanlam Ltd PK

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam Ltd PK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Sanlam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unum Group

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Unum Group are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Unum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sanlam and Unum

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

The idea behind Sanlam Ltd PK and Unum Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.