Correlation Between Sun Life and Batero Gold

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

Diversification Opportunities for Sun Life and Batero Gold

-0.14

Correlation Coefficient

Sun Life  Batero Gold

Good diversification

The 3 months correlation between Sun and Batero is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Batero Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batero Gold Corp 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 Batero Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batero Gold Corp has no effect on the direction of Sun Life i.e., Sun Life and Batero Gold go up and down completely randomly.

Pair Corralation between Sun Life and Batero Gold

Assuming the 90 days trading horizon Sun Life is expected to generate 11.89 times less return on investment than Batero Gold. But when comparing it to its historical volatility, Sun Life Financial is 13.47 times less risky than Batero Gold. It trades about 0.07 of its potential returns per unit of risk. Batero Gold Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Batero Gold Corp on July 20, 2024 and sell it today you would earn a total of  1.50  from holding Batero Gold Corp or generate 50.0% return on investment over 90 days.

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

Sun Life Financial  vs.  Batero Gold Corp

Sun Life Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Batero Gold Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Batero Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Batero Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Batero Gold

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

The idea behind Sun Life Financial and Batero Gold Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.