Correlation Between Sun Lif and Fortis
Can any of the company-specific risk be diversified away by investing in both Sun Lif and Fortis 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 Lif and Fortis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Lif Non and Fortis Inc, you can compare the effects of market volatilities on Sun Lif and Fortis 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 Lif with a short position of Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Lif and Fortis.
Diversification Opportunities for Sun Lif and Fortis
Good diversification
The 3 months correlation between Sun and Fortis is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc and Sun Lif 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 Lif Non are associated (or correlated) with Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of Sun Lif i.e., Sun Lif and Fortis go up and down completely randomly.
Pair Corralation between Sun Lif and Fortis
Assuming the 90 days trading horizon Sun Lif Non is expected to generate 0.68 times more return on investment than Fortis. However, Sun Lif Non is 1.46 times less risky than Fortis. It trades about 0.49 of its potential returns per unit of risk. Fortis Inc is currently generating about 0.15 per unit of risk. If you would invest 1,940 in Sun Lif Non on November 3, 2024 and sell it today you would earn a total of 174.00 from holding Sun Lif Non or generate 8.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Lif Non vs. Fortis Inc
Performance |
| Timeline |
| Sun Lif Non |
| Fortis Inc |
Sun Lif and Fortis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Lif and Fortis
The main advantage of trading using opposite Sun Lif and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Lif position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.The idea behind Sun Lif Non and Fortis Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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