Correlation Between Sun Life and STI Education

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

Diversification Opportunities for Sun Life and STI Education

0.83

Correlation Coefficient

Sun Life  STI Education

Very poor diversification

The 3 months correlation between Sun and STI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and STI Education Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STI Education Systems 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 STI Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STI Education Systems has no effect on the direction of Sun Life i.e., Sun Life and STI Education go up and down completely randomly.

Pair Corralation between Sun Life and STI Education

Assuming the 90 days trading horizon Sun Life Financial is expected to generate 0.65 times more return on investment than STI Education. However, Sun Life Financial is 1.53 times less risky than STI Education. It trades about -0.03 of its potential returns per unit of risk. STI Education Systems is currently generating about -0.23 per unit of risk. If you would invest  345,000  in Sun Life Financial on April 19, 2025 and sell it today you would lose (4,800) from holding Sun Life Financial or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.3%
Values	Daily Returns

Sun Life Financial  vs.  STI Education Systems

Sun Life Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sun Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

STI Education Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and STI Education

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

The idea behind Sun Life Financial and STI Education Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.