Correlation Between Sun Life and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Sun Life and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Life Non and Verizon Communications CDR, you can compare the effects of market volatilities on Sun Life and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Verizon Communications.
Diversification Opportunities for Sun Life and Verizon Communications
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and Verizon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Non and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Non are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Sun Life i.e., Sun Life and Verizon Communications go up and down completely randomly.
Pair Corralation between Sun Life and Verizon Communications
Assuming the 90 days trading horizon Sun Life is expected to generate 1.38 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, Sun Life Non is 2.3 times less risky than Verizon Communications. It trades about 0.28 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,773 in Verizon Communications CDR on September 12, 2024 and sell it today you would earn a total of 80.00 from holding Verizon Communications CDR or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Non vs. Verizon Communications CDR
Performance |
| Timeline |
| Sun Life Non |
| Verizon Communications |
Sun Life and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Verizon Communications
The main advantage of trading using opposite Sun Life and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Sun Life vs. Sun Life Financial | Sun Life vs. Sun Life Financial | Sun Life vs. Solar Alliance Energy | Sun Life vs. EcoSynthetix |
| Verizon Communications vs. Berkshire Hathaway CDR | Verizon Communications vs. Microsoft Corp CDR | Verizon Communications vs. Apple Inc CDR | Verizon Communications vs. Alphabet Inc CDR |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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