Correlation Between Sun Life and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both Sun Life and NexGen Energy 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 NexGen Energy 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 NexGen Energy, you can compare the effects of market volatilities on Sun Life and NexGen Energy 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 NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and NexGen Energy.
Diversification Opportunities for Sun Life and NexGen Energy
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sun and NexGen is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Sun Life i.e., Sun Life and NexGen Energy go up and down completely randomly.
Pair Corralation between Sun Life and NexGen Energy
Assuming the 90 days trading horizon Sun Life is expected to generate 2.41 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, Sun Life Financial is 3.72 times less risky than NexGen Energy. It trades about 0.1 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 699.00 in NexGen Energy on September 12, 2024 and sell it today you would earn a total of 433.00 from holding NexGen Energy or generate 61.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. NexGen Energy
Performance |
| Timeline |
| Sun Life Financial |
| NexGen Energy |
Sun Life and NexGen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and NexGen Energy
The main advantage of trading using opposite Sun Life and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, NexGen Energy 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.| Sun Life vs. Sun Life Non | Sun Life vs. Solar Alliance Energy | Sun Life vs. EcoSynthetix | Sun Life vs. Tarku Resources |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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