Correlation Between Arch Capital and Sun Life
Can any of the company-specific risk be diversified away by investing in both Arch 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 Arch 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 Arch Capital Group and Sun Life Financial, you can compare the effects of market volatilities on Arch 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 Arch Capital with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Sun Life.
Diversification Opportunities for Arch Capital and Sun Life
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arch and Sun is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group 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 Arch 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 Arch Capital Group 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 Arch Capital i.e., Arch Capital and Sun Life go up and down completely randomly.
Pair Corralation between Arch Capital and Sun Life
Assuming the 90 days horizon Arch Capital Group is expected to under-perform the Sun Life. But the preferred stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 1.25 times less risky than Sun Life. The preferred stock trades about -0.15 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 5,626 in Sun Life Financial on August 30, 2024 and sell it today you would earn a total of 466.00 from holding Sun Life Financial or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arch Capital Group vs. Sun Life Financial
Performance |
| Timeline |
| Arch Capital Group |
| Sun Life Financial |
Arch Capital and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Sun Life
The main advantage of trading using opposite Arch Capital and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch 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.| Arch Capital vs. Arch Capital Group | Arch Capital vs. The Allstate | Arch Capital vs. Brighthouse Financial | Arch Capital vs. Athene Holding |
| Sun Life vs. Axa Equitable Holdings | Sun Life vs. American International Group | Sun Life vs. Arch Capital Group | Sun Life vs. Old Republic International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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