Correlation Between Sun Life and Imperial Oil
Can any of the company-specific risk be diversified away by investing in both Sun Life and Imperial Oil 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 Imperial Oil 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 Imperial Oil, you can compare the effects of market volatilities on Sun Life and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Imperial Oil.
Diversification Opportunities for Sun Life and Imperial Oil
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sun and Imperial is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Sun Life i.e., Sun Life and Imperial Oil go up and down completely randomly.
Pair Corralation between Sun Life and Imperial Oil
Assuming the 90 days trading horizon Sun Life Financial is expected to generate 0.76 times more return on investment than Imperial Oil. However, Sun Life Financial is 1.32 times less risky than Imperial Oil. It trades about 0.53 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.18 per unit of risk. If you would invest 7,670 in Sun Life Financial on September 3, 2024 and sell it today you would earn a total of 947.00 from holding Sun Life Financial or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Imperial Oil
Performance |
| Timeline |
| Sun Life Financial |
| Imperial Oil |
Sun Life and Imperial Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Imperial Oil
The main advantage of trading using opposite Sun Life and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Imperial Oil 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 Imperial Oil will offset losses from the drop in Imperial Oil'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 |
| Imperial Oil vs. Canadian Natural Resources | Imperial Oil vs. Cenovus Energy | Imperial Oil vs. TC Energy Corp | Imperial Oil vs. Suncor Energy |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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