Correlation Between Sun Life and East West
Can any of the company-specific risk be diversified away by investing in both Sun Life and East West 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 East West 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 East West Banking, you can compare the effects of market volatilities on Sun Life and East West 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 East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and East West.
Diversification Opportunities for Sun Life and East West
Very weak diversification
The 3 months correlation between Sun and East is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and East West Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Banking 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 East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Banking has no effect on the direction of Sun Life i.e., Sun Life and East West go up and down completely randomly.
Pair Corralation between Sun Life and East West
Assuming the 90 days trading horizon Sun Life Financial is expected to generate 4.3 times more return on investment than East West. However, Sun Life is 4.3 times more volatile than East West Banking. It trades about 0.1 of its potential returns per unit of risk. East West Banking is currently generating about -0.1 per unit of risk. If you would invest 296,963 in Sun Life Financial on August 29, 2024 and sell it today you would earn a total of 23,037 from holding Sun Life Financial or generate 7.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Sun Life Financial vs. East West Banking
Performance |
| Timeline |
| Sun Life Financial |
| East West Banking |
Sun Life and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and East West
The main advantage of trading using opposite Sun Life and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Sun Life vs. Allhome Corp | Sun Life vs. Jollibee Foods Corp | Sun Life vs. LFM Properties Corp | Sun Life vs. PXP Energy Corp |
| East West vs. Apex Mining Co | East West vs. Atlas Consolidated Mining | East West vs. Transpacific Broadband Group | East West vs. Philex Mining Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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