Correlation Between 1st Capital and Sun Life

Can any of the company-specific risk be diversified away by investing in both 1st Capital 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 1st Capital and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Capital Bank and Sun Life Financial, you can compare the effects of market volatilities on 1st Capital 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 1st Capital with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Capital and Sun Life.

Diversification Opportunities for 1st Capital and Sun Life

0.68

Correlation Coefficient

1st Capital  Sun Life

Poor diversification

The 3 months correlation between 1st and Sun is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding 1st Capital Bank 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 1st Capital 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 1st Capital Bank 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 1st Capital i.e., 1st Capital and Sun Life go up and down completely randomly.

Pair Corralation between 1st Capital and Sun Life

Given the investment horizon of 90 days 1st Capital Bank is expected to under-perform the Sun Life. But the otc stock apears to be less risky and, when comparing its historical volatility, 1st Capital Bank is 1.82 times less risky than Sun Life. The otc stock trades about -0.24 of its potential returns per unit of risk. The Sun Life Financial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,291  in Sun Life Financial on February 15, 2024 and sell it today you would lose (211.00) from holding Sun Life Financial or give up 3.99% of portfolio value over 90 days.

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

1st Capital Bank  vs.  Sun Life Financial

1st Capital Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 1st Capital and Sun Life

The main advantage of trading using opposite 1st Capital and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Capital 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 1st Capital Bank 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.