Correlation Between SUN LIFE and Microsoft
Can any of the company-specific risk be diversified away by investing in both SUN LIFE and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on SUN LIFE and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN LIFE and Microsoft.
Diversification Opportunities for SUN LIFE and Microsoft
Very weak diversification
The 3 months correlation between SUN and Microsoft is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of SUN LIFE i.e., SUN LIFE and Microsoft go up and down completely randomly.
Pair Corralation between SUN LIFE and Microsoft
Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, SUN LIFE FINANCIAL is 2.84 times less risky than Microsoft. The stock trades about -0.14 of its potential returns per unit of risk. The Microsoft is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 40,930 in Microsoft on November 4, 2024 and sell it today you would lose (775.00) from holding Microsoft or give up 1.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SUN LIFE FINANCIAL vs. Microsoft
Performance |
| Timeline |
| SUN LIFE FINANCIAL |
| Microsoft |
SUN LIFE and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SUN LIFE and Microsoft
The main advantage of trading using opposite SUN LIFE and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUN LIFE position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| SUN LIFE vs. ZhongAn Online P | SUN LIFE vs. CARSALESCOM | SUN LIFE vs. CarsalesCom | SUN LIFE vs. INVITATION HOMES DL |
| Microsoft vs. ULTRA CLEAN HLDGS | Microsoft vs. INSURANCE AUST GRP | Microsoft vs. HANOVER INSURANCE | Microsoft vs. Safety Insurance Group |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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