Correlation Between Sun Life and AP Møller

Can any of the company-specific risk be diversified away by investing in both Sun Life and AP Møller 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 AP Møller 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 AP Mller , you can compare the effects of market volatilities on Sun Life and AP Møller 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 AP Møller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and AP Møller.

Diversification Opportunities for Sun Life and AP Møller

-0.71

Correlation Coefficient

Sun Life  AP Møller

Pay attention - limited upside

The 3 months correlation between Sun and AMKBF is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Sun Life i.e., Sun Life and AP Møller go up and down completely randomly.

Pair Corralation between Sun Life and AP Møller

Considering the 90-day investment horizon Sun Life is expected to generate 22.79 times less return on investment than AP Møller. But when comparing it to its historical volatility, Sun Life Financial is 12.17 times less risky than AP Møller. It trades about 0.04 of its potential returns per unit of risk. AP Mller is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  162,478  in AP Mller on March 8, 2024 and sell it today you would earn a total of  11,077  from holding AP Mller or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sun Life Financial  vs.  AP Mller

Sun Life Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AP Møller

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and AP Møller

The main advantage of trading using opposite Sun Life and AP Møller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, AP Møller 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 AP Møller will offset losses from the drop in AP Møller's long position.

The idea behind Sun Life Financial and AP Mller pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.