Correlation Between Solar Alliance and Sun Life

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

By analyzing existing cross correlation between Solar Alliance Energy and Sun Life Financial, you can compare the effects of market volatilities on Solar Alliance and Sun Life 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 Solar Alliance with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and Sun Life.

Diversification Opportunities for Solar Alliance and Sun Life

0.68

Correlation Coefficient

Solar Alliance  Sun Life

Poor diversification

The 3 months correlation between Solar and Sun is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Solar Alliance i.e., Solar Alliance and Sun Life go up and down completely randomly.

Pair Corralation between Solar Alliance and Sun Life

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 21.19 times more return on investment than Sun Life. However, Solar Alliance is 21.19 times more volatile than Sun Life Financial. It trades about 0.02 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.05 per unit of risk. If you would invest  5.00  in Solar Alliance Energy on September 8, 2024 and sell it today you would lose (2.00) from holding Solar Alliance Energy or give up 40.0% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Sun Life Financial

Solar Alliance Energy

Risk-Adjusted Performance

1 of 100

Insignificant

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.

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.

Pair Trading with Solar Alliance and Sun Life

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

The idea behind Solar Alliance Energy and Sun Life Financial 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 Directory module to find actively traded commodities issued by global exchanges.