Correlation Between Sun Life and Franchise
Can any of the company-specific risk be diversified away by investing in both Sun Life and Franchise 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 Franchise 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 Franchise Group, you can compare the effects of market volatilities on Sun Life and Franchise 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 Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Franchise.
Diversification Opportunities for Sun Life and Franchise
Poor diversification
The 3 months correlation between Sun and Franchise is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group 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 Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of Sun Life i.e., Sun Life and Franchise go up and down completely randomly.
Pair Corralation between Sun Life and Franchise
If you would invest 5,696 in Sun Life Financial on August 28, 2024 and sell it today you would earn a total of 462.00 from holding Sun Life Financial or generate 8.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Sun Life Financial vs. Franchise Group
Performance |
| Timeline |
| Sun Life Financial |
| Franchise Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sun Life and Franchise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Franchise
The main advantage of trading using opposite Sun Life and Franchise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Franchise 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 Franchise will offset losses from the drop in Franchise'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 |
| Franchise vs. Compania Cervecerias Unidas | Franchise vs. Boston Beer | Franchise vs. Westrock Coffee | Franchise vs. Entravision Communications |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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