Correlation Between Sun Life and PRINCIPAL FINANCIAL

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

Diversification Opportunities for Sun Life and PRINCIPAL FINANCIAL

0.44

Correlation Coefficient

Sun Life  PRINCIPAL FINANCIAL

Very weak diversification

The 3 months correlation between Sun and PRINCIPAL is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and PRINCIPAL FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRINCIPAL FINANCIAL 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 PRINCIPAL FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRINCIPAL FINANCIAL has no effect on the direction of Sun Life i.e., Sun Life and PRINCIPAL FINANCIAL go up and down completely randomly.

Pair Corralation between Sun Life and PRINCIPAL FINANCIAL

Assuming the 90 days horizon Sun Life is expected to generate 1.26 times less return on investment than PRINCIPAL FINANCIAL. But when comparing it to its historical volatility, Sun Life Financial is 1.36 times less risky than PRINCIPAL FINANCIAL. It trades about 0.07 of its potential returns per unit of risk. PRINCIPAL FINANCIAL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,388  in PRINCIPAL FINANCIAL on April 24, 2025 and sell it today you would earn a total of  312.00  from holding PRINCIPAL FINANCIAL or generate 4.88% return on investment over 90 days.

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

Sun Life Financial  vs.  PRINCIPAL FINANCIAL

Sun Life Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sun Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PRINCIPAL FINANCIAL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PRINCIPAL FINANCIAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PRINCIPAL FINANCIAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sun Life and PRINCIPAL FINANCIAL

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

The idea behind Sun Life Financial and PRINCIPAL FINANCIAL 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.