Correlation Between Sun Life and Equitable Holdings

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

Diversification Opportunities for Sun Life and Equitable Holdings

-0.33

Correlation Coefficient

Sun Life  Equitable Holdings

Very good diversification

The 3 months correlation between Sun and Equitable is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of Sun Life i.e., Sun Life and Equitable Holdings go up and down completely randomly.

Pair Corralation between Sun Life and Equitable Holdings

Considering the 90-day investment horizon Sun Life Financial is expected to generate 1.08 times more return on investment than Equitable Holdings. However, Sun Life is 1.08 times more volatile than Equitable Holdings. It trades about 0.31 of its potential returns per unit of risk. Equitable Holdings is currently generating about 0.01 per unit of risk. If you would invest  5,696  in Sun Life Financial on August 28, 2024 and sell it today you would earn a total of  462.00  from holding Sun Life Financial or generate 8.11% 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.  Equitable Holdings

Sun Life Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Sun Life reported solid returns over the last few months and may actually be approaching a breakup point.

Equitable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Equitable Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sun Life and Equitable Holdings

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

The idea behind Sun Life Financial and Equitable Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.