Correlation Between National Bank and Sun Life
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and Sun Life Financial, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Sun Life.
Diversification Opportunities for National Bank and Sun Life
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Sun is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of 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 National Bank 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 National Bank of 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 National Bank i.e., National Bank and Sun Life go up and down completely randomly.
Pair Corralation between National Bank and Sun Life
Assuming the 90 days trading horizon National Bank is expected to generate 2.4 times less return on investment than Sun Life. But when comparing it to its historical volatility, National Bank of is 3.35 times less risky than Sun Life. It trades about 0.16 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,600 in Sun Life Financial on September 2, 2024 and sell it today you would earn a total of 43.00 from holding Sun Life Financial or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. Sun Life Financial
Performance |
| Timeline |
| National Bank |
| Sun Life Financial |
National Bank and Sun Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Sun Life
The main advantage of trading using opposite National Bank and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Fairfax Financial Holdings | National Bank vs. iShares Canadian HYBrid | National Bank vs. Brompton European Dividend | National Bank vs. Solar Alliance Energy |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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