Correlation Between Sun Life and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Sun Life and Sensient Technologies 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 Sensient Technologies 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 Sensient Technologies, you can compare the effects of market volatilities on Sun Life and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Sensient Technologies.
Diversification Opportunities for Sun Life and Sensient Technologies
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and Sensient is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Sun Life i.e., Sun Life and Sensient Technologies go up and down completely randomly.
Pair Corralation between Sun Life and Sensient Technologies
Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.81 times more return on investment than Sensient Technologies. However, Sun Life Financial is 1.23 times less risky than Sensient Technologies. It trades about -0.07 of its potential returns per unit of risk. Sensient Technologies is currently generating about -0.17 per unit of risk. If you would invest 5,707 in Sun Life Financial on December 1, 2024 and sell it today you would lose (152.00) from holding Sun Life Financial or give up 2.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Sensient Technologies
Performance |
| Timeline |
| Sun Life Financial |
| Sensient Technologies |
Sun Life and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Sensient Technologies
The main advantage of trading using opposite Sun Life and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' 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 |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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