Correlation Between Sun Life and Grupo Aeroportuario

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

Diversification Opportunities for Sun Life and Grupo Aeroportuario

-0.66

Correlation Coefficient

Sun Life  Grupo Aeroportuario

Excellent diversification

The 3 months correlation between Sun and Grupo is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Grupo Aeroportuario del in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aeroportuario del 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 Grupo Aeroportuario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aeroportuario del has no effect on the direction of Sun Life i.e., Sun Life and Grupo Aeroportuario go up and down completely randomly.

Pair Corralation between Sun Life and Grupo Aeroportuario

Considering the 90-day investment horizon Sun Life is expected to generate 260.96 times less return on investment than Grupo Aeroportuario. But when comparing it to its historical volatility, Sun Life Financial is 48.13 times less risky than Grupo Aeroportuario. It trades about 0.03 of its potential returns per unit of risk. Grupo Aeroportuario del is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Grupo Aeroportuario del on February 20, 2024 and sell it today you would earn a total of  1,673  from holding Grupo Aeroportuario del or generate 796.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.08%
Values	Daily Returns

Sun Life Financial  vs.  Grupo Aeroportuario del

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 nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Grupo Aeroportuario del

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aeroportuario del are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Grupo Aeroportuario reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Grupo Aeroportuario

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

The idea behind Sun Life Financial and Grupo Aeroportuario del 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.