Correlation Between Sun Life and Berkshire Hathaway

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

Diversification Opportunities for Sun Life and Berkshire Hathaway

0.72

Correlation Coefficient

Sun Life  Berkshire Hathaway

Poor diversification

The 3 months correlation between Sun and Berkshire is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway 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 Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Sun Life i.e., Sun Life and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Sun Life and Berkshire Hathaway

Considering the 90-day investment horizon Sun Life is expected to generate 5.01 times less return on investment than Berkshire Hathaway. In addition to that, Sun Life is 1.24 times more volatile than Berkshire Hathaway. It trades about 0.02 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.12 per unit of volatility. If you would invest  50,665,000  in Berkshire Hathaway on January 24, 2024 and sell it today you would earn a total of  11,063,400  from holding Berkshire Hathaway or generate 21.84% return on investment over 90 days.

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

Sun Life Financial  vs.  Berkshire Hathaway

Sun Life Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Berkshire Hathaway

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Sun Life and Berkshire Hathaway

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

The idea behind Sun Life Financial and Berkshire Hathaway 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.