Correlation Between Axa SA and Sun Life
Can any of the company-specific risk be diversified away by investing in both Axa SA 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 Axa SA and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axa SA ADR and Sun Life Financial, you can compare the effects of market volatilities on Axa SA 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 Axa SA with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axa SA and Sun Life.
Diversification Opportunities for Axa SA and Sun Life
Weak diversification
The 3 months correlation between Axa and Sun is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Axa SA ADR 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 Axa SA 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 Axa SA ADR 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 Axa SA i.e., Axa SA and Sun Life go up and down completely randomly.
Pair Corralation between Axa SA and Sun Life
Assuming the 90 days horizon Axa SA ADR is expected to generate 1.3 times more return on investment than Sun Life. However, Axa SA is 1.3 times more volatile than Sun Life Financial. It trades about 0.08 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.04 per unit of risk. If you would invest 2,126 in Axa SA ADR on January 25, 2024 and sell it today you would earn a total of 1,234 from holding Axa SA ADR or generate 58.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.33% |
| Values | Daily Returns |
Axa SA ADR vs. Sun Life Financial
Performance |
| Timeline |
| Axa SA ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Sun Life Financial |
Axa SA and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axa SA and Sun Life
The main advantage of trading using opposite Axa SA and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axa SA 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 Axa SA ADR 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.Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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