Correlation Between Sun Life and East Africa
Can any of the company-specific risk be diversified away by investing in both Sun Life and East Africa 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 Africa 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 Africa Metals, you can compare the effects of market volatilities on Sun Life and East Africa 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 Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and East Africa.
Diversification Opportunities for Sun Life and East Africa
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sun and East is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals 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 Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Sun Life i.e., Sun Life and East Africa go up and down completely randomly.
Pair Corralation between Sun Life and East Africa
Considering the 90-day investment horizon Sun Life is expected to generate 77.97 times less return on investment than East Africa. But when comparing it to its historical volatility, Sun Life Financial is 64.56 times less risky than East Africa. It trades about 0.07 of its potential returns per unit of risk. East Africa Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7.91 in East Africa Metals on September 3, 2024 and sell it today you would earn a total of 3.09 from holding East Africa Metals or generate 39.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sun Life Financial vs. East Africa Metals
Performance |
| Timeline |
| Sun Life Financial |
| East Africa Metals |
Sun Life and East Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and East Africa
The main advantage of trading using opposite Sun Life and East Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, East Africa 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 Africa will offset losses from the drop in East Africa's long position.| Sun Life vs. Axa Equitable Holdings | Sun Life vs. American International Group | Sun Life vs. Arch Capital Group | Sun Life vs. Old Republic International |
| East Africa vs. Pasinex Resources Limited | East Africa vs. Commander Resources | East Africa vs. Forsys Metals Corp | East Africa vs. American CuMo Mining |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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