Correlation Between North American and Sun Life
Can any of the company-specific risk be diversified away by investing in both North American and Sun Life 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 North American and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and Sun Life Financial, you can compare the effects of market volatilities on North American and Sun Life 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 North American with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Sun Life.
Diversification Opportunities for North American and Sun Life
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Sun is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and North American 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 North American Financial are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of North American i.e., North American and Sun Life go up and down completely randomly.
Pair Corralation between North American and Sun Life
Assuming the 90 days trading horizon North American Financial is expected to generate 1.61 times more return on investment than Sun Life. However, North American is 1.61 times more volatile than Sun Life Financial. It trades about 0.4 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.06 per unit of risk. If you would invest 593.00 in North American Financial on August 30, 2024 and sell it today you would earn a total of 169.00 from holding North American Financial or generate 28.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. Sun Life Financial
Performance |
| Timeline |
| North American Financial |
| Sun Life Financial |
North American and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Sun Life
The main advantage of trading using opposite North American and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Sun Life 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 Sun Life will offset losses from the drop in Sun Life's long position.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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