Correlation Between Sun Life and Pekin Life

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

Diversification Opportunities for Sun Life and Pekin Life

0.48

Correlation Coefficient

Sun Life  Pekin Life

Very weak diversification

The 3 months correlation between Sun and Pekin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance 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 Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of Sun Life i.e., Sun Life and Pekin Life go up and down completely randomly.

Pair Corralation between Sun Life and Pekin Life

Considering the 90-day investment horizon Sun Life Financial is expected to generate 3.32 times more return on investment than Pekin Life. However, Sun Life is 3.32 times more volatile than Pekin Life Insurance. It trades about 0.24 of its potential returns per unit of risk. Pekin Life Insurance is currently generating about 0.13 per unit of risk. If you would invest  5,396  in Sun Life Financial on August 26, 2024 and sell it today you would earn a total of  722.00  from holding Sun Life Financial or generate 13.38% return on investment over 90 days.

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

Sun Life Financial  vs.  Pekin Life Insurance

Sun Life Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sun Life and Pekin Life

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

The idea behind Sun Life Financial and Pekin Life Insurance 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.