Correlation Between Sun Life and IGM Financial
Can any of the company-specific risk be diversified away by investing in both Sun Life and IGM 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 IGM 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 IGM Financial, you can compare the effects of market volatilities on Sun Life and IGM 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 IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and IGM Financial.
Diversification Opportunities for Sun Life and IGM Financial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and IGM is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM 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 IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Sun Life i.e., Sun Life and IGM Financial go up and down completely randomly.
Pair Corralation between Sun Life and IGM Financial
Assuming the 90 days trading horizon Sun Life Financial is expected to generate 0.6 times more return on investment than IGM Financial. However, Sun Life Financial is 1.66 times less risky than IGM Financial. It trades about 0.01 of its potential returns per unit of risk. IGM Financial is currently generating about -0.05 per unit of risk. If you would invest 8,412 in Sun Life Financial on November 9, 2024 and sell it today you would earn a total of 6.00 from holding Sun Life Financial or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. IGM Financial
Performance |
| Timeline |
| Sun Life Financial |
| IGM Financial |
Sun Life and IGM Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and IGM Financial
The main advantage of trading using opposite Sun Life and IGM Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, IGM 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 IGM Financial will offset losses from the drop in IGM Financial's long position.| Sun Life vs. Manulife Financial Corp | Sun Life vs. Great West Lifeco | Sun Life vs. National Bank of | Sun Life vs. Canadian Imperial Bank |
| IGM Financial vs. CI Financial Corp | IGM Financial vs. Great West Lifeco | IGM Financial vs. iA Financial | IGM Financial vs. Power |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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