Correlation Between SM Investments and Sun Life

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

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

Diversification Opportunities for SM Investments and Sun Life

0.4

Correlation Coefficient

SM Investments  Sun Life

Very weak diversification

The 3 months correlation between SVTMF and Sun is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments 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 SM Investments 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 SM Investments 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 SM Investments i.e., SM Investments and Sun Life go up and down completely randomly.

Pair Corralation between SM Investments and Sun Life

Assuming the 90 days horizon SM Investments is expected to generate 0.02 times more return on investment than Sun Life. However, SM Investments is 43.22 times less risky than Sun Life. It trades about 0.13 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.08 per unit of risk. If you would invest  1,550  in SM Investments on May 13, 2025 and sell it today you would earn a total of  4.00  from holding SM Investments or generate 0.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

SM Investments  vs.  Sun Life Financial

SM Investments

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SM Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Life Financial

Risk-Adjusted Performance

Weakest

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SM Investments and Sun Life

The main advantage of trading using opposite SM Investments and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments 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 SM Investments 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.