Correlation Between Sun Life and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Sun Life and Fairfax Financial 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 Fairfax Financial 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 Fairfax Financial Holdings, you can compare the effects of market volatilities on Sun Life and Fairfax Financial 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 Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Fairfax Financial.
Diversification Opportunities for Sun Life and Fairfax Financial
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sun and Fairfax is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Sun Life i.e., Sun Life and Fairfax Financial go up and down completely randomly.
Pair Corralation between Sun Life and Fairfax Financial
Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the Fairfax Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.26 times less risky than Fairfax Financial. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,226 in Fairfax Financial Holdings on September 3, 2024 and sell it today you would earn a total of 166.00 from holding Fairfax Financial Holdings or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Sun Life Financial |
| Fairfax Financial |
Sun Life and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Fairfax Financial
The main advantage of trading using opposite Sun Life and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.| Sun Life vs. Upstart Investments | Sun Life vs. Economic Investment Trust | Sun Life vs. Contagious Gaming | Sun Life vs. Bip Investment Corp |
| Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings | Fairfax Financial vs. Fairfax Financial Holdings |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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