Correlation Between Dow Jones and Sun Life
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Sun Life Financial, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sun Life.
Diversification Opportunities for Dow Jones and Sun Life
Almost no diversification
The 3 months correlation between Dow and Sun is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Sun Life go up and down completely randomly.
Pair Corralation between Dow Jones and Sun Life
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.91 times less return on investment than Sun Life. But when comparing it to its historical volatility, Dow Jones Industrial is 1.59 times less risky than Sun Life. It trades about 0.37 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 4,977 in Sun Life Financial on September 1, 2024 and sell it today you would earn a total of 773.00 from holding Sun Life Financial or generate 15.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sun Life Financial
Performance |
| Timeline |
Dow Jones and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sun Life Financial
Pair trading matchups for Sun Life
Pair Trading with Dow Jones and Sun Life
The main advantage of trading using opposite Dow Jones and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Sun Life vs. Sunstone Hotel Investors | Sun Life vs. China Resources Beer | Sun Life vs. Suntory Beverage Food | Sun Life vs. BOSTON BEER A |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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