Correlation Between Sun Life and Chubb
Can any of the company-specific risk be diversified away by investing in both Sun Life and Chubb 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 Chubb 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 Chubb, you can compare the effects of market volatilities on Sun Life and Chubb 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 Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Chubb.
Diversification Opportunities for Sun Life and Chubb
Very poor diversification
The 3 months correlation between Sun and Chubb is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Sun Life i.e., Sun Life and Chubb go up and down completely randomly.
Pair Corralation between Sun Life and Chubb
Considering the 90-day investment horizon Sun Life is expected to generate 1.62 times less return on investment than Chubb. But when comparing it to its historical volatility, Sun Life Financial is 1.02 times less risky than Chubb. It trades about 0.02 of its potential returns per unit of risk. Chubb is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 20,388 in Chubb on January 17, 2024 and sell it today you would earn a total of 4,056 from holding Chubb or generate 19.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sun Life Financial vs. Chubb
Performance |
| Timeline |
| Sun Life Financial |
| Chubb |
Sun Life and Chubb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Chubb
The main advantage of trading using opposite Sun Life and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Chubb 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 Chubb will offset losses from the drop in Chubb'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 |
| Chubb vs. Aquagold International | Chubb vs. Thrivent High Yield | Chubb vs. Morningstar Unconstrained Allocation | Chubb vs. T Rowe Price |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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