Correlation Between Visa and Sun Life
Can any of the company-specific risk be diversified away by investing in both Visa and Sun Life 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 Visa and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Sun Life Financial, you can compare the effects of market volatilities on Visa and Sun Life 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 Visa with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Sun Life.
Diversification Opportunities for Visa and Sun Life
Very poor diversification
The 3 months correlation between Visa and Sun is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Visa 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 Visa Class A are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Visa i.e., Visa and Sun Life go up and down completely randomly.
Pair Corralation between Visa and Sun Life
Taking into account the 90-day investment horizon Visa is expected to generate 1.15 times less return on investment than Sun Life. But when comparing it to its historical volatility, Visa Class A is 1.29 times less risky than Sun Life. It trades about 0.33 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,250 in Sun Life Financial on August 29, 2024 and sell it today you would earn a total of 600.00 from holding Sun Life Financial or generate 11.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Sun Life Financial
Performance |
| Timeline |
| Visa Class A |
| Sun Life Financial |
Visa and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Sun Life
The main advantage of trading using opposite Visa and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life's long position.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Sun Life vs. Pure Storage | Sun Life vs. Science Applications International | Sun Life vs. SBA Communications Corp | Sun Life vs. Public Storage |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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