Correlation Between Sun Life and Magna International
Can any of the company-specific risk be diversified away by investing in both Sun Life and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on Sun Life and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Magna International.
Diversification Opportunities for Sun Life and Magna International
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sun and Magna is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Sun Life i.e., Sun Life and Magna International go up and down completely randomly.
Pair Corralation between Sun Life and Magna International
Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the Magna International. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 3.36 times less risky than Magna International. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Magna International is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5,922 in Magna International on August 28, 2024 and sell it today you would earn a total of 583.00 from holding Magna International or generate 9.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Magna International
Performance |
| Timeline |
| Sun Life Financial |
| Magna International |
Sun Life and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Magna International
The main advantage of trading using opposite Sun Life and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Sun Life vs. Sun Life Financial | Sun Life vs. Forstrong Global Income | Sun Life vs. BMO Aggregate Bond | Sun Life vs. Terreno Resources Corp |
| Magna International vs. Canadian National Railway | Magna International vs. Nutrien | Magna International vs. Restaurant Brands International | Magna International vs. Canadian Pacific Railway |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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