Correlation Between Sun Life and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sun Life and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Sun Life and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Dow Jones.
Diversification Opportunities for Sun Life and Dow Jones
Poor diversification
The 3 months correlation between Sun and Dow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Sun Life i.e., Sun Life and Dow Jones go up and down completely randomly.
Pair Corralation between Sun Life and Dow Jones
Assuming the 90 days trading horizon Sun Life Financial is expected to generate 4.61 times more return on investment than Dow Jones. However, Sun Life is 4.61 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 262,495 in Sun Life Financial on August 25, 2024 and sell it today you would earn a total of 77,505 from holding Sun Life Financial or generate 29.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.66% |
| Values | Daily Returns |
Sun Life Financial vs. Dow Jones Industrial
Performance |
| Timeline |
Sun Life and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sun Life Financial
Pair trading matchups for Sun Life
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sun Life and Dow Jones
The main advantage of trading using opposite Sun Life and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Sun Life vs. Manulife Financial Corp | Sun Life vs. National Reinsurance | Sun Life vs. Allhome Corp | Sun Life vs. Jollibee Foods Corp |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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