Correlation Between Sun Life and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Sun Life and CNH Industrial 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 CNH Industrial 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 CNH Industrial NV, you can compare the effects of market volatilities on Sun Life and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and CNH Industrial.
Diversification Opportunities for Sun Life and CNH Industrial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and CNH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Sun Life i.e., Sun Life and CNH Industrial go up and down completely randomly.
Pair Corralation between Sun Life and CNH Industrial
Assuming the 90 days horizon Sun Life Financial is expected to generate 0.39 times more return on investment than CNH Industrial. However, Sun Life Financial is 2.6 times less risky than CNH Industrial. It trades about 0.44 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.17 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. CNH Industrial NV
Performance |
| Timeline |
| Sun Life Financial |
| CNH Industrial NV |
Sun Life and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and CNH Industrial
The main advantage of trading using opposite Sun Life and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| Sun Life vs. Sunstone Hotel Investors | Sun Life vs. China Resources Beer | Sun Life vs. Suntory Beverage Food | Sun Life vs. BOSTON BEER A |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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