Correlation Between Sun Life and Providence Resources
Can any of the company-specific risk be diversified away by investing in both Sun Life and Providence Resources 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 Providence Resources 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 Providence Resources, you can compare the effects of market volatilities on Sun Life and Providence Resources 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 Providence Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Providence Resources.
Diversification Opportunities for Sun Life and Providence Resources
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sun and Providence is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Providence Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Providence Resources 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 Providence Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Providence Resources has no effect on the direction of Sun Life i.e., Sun Life and Providence Resources go up and down completely randomly.
Pair Corralation between Sun Life and Providence Resources
Considering the 90-day investment horizon Sun Life is expected to generate 6.95 times less return on investment than Providence Resources. But when comparing it to its historical volatility, Sun Life Financial is 14.34 times less risky than Providence Resources. It trades about 0.07 of its potential returns per unit of risk. Providence Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.35 in Providence Resources on August 27, 2024 and sell it today you would lose (3.83) from holding Providence Resources or give up 88.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Providence Resources
Performance |
| Timeline |
| Sun Life Financial |
| Providence Resources |
Sun Life and Providence Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Providence Resources
The main advantage of trading using opposite Sun Life and Providence Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Providence Resources 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 Providence Resources will offset losses from the drop in Providence Resources' 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 |
| Providence Resources vs. Absolute Health and | Providence Resources vs. China Health Management | Providence Resources vs. Embrace Change Acquisition | Providence Resources vs. TransAKT |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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