Correlation Between Sun Life and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both Sun Life and Laurentian Bank 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 Laurentian Bank 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 Laurentian Bank, you can compare the effects of market volatilities on Sun Life and Laurentian Bank 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 Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Laurentian Bank.
Diversification Opportunities for Sun Life and Laurentian Bank
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sun and Laurentian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Sun Life i.e., Sun Life and Laurentian Bank go up and down completely randomly.
Pair Corralation between Sun Life and Laurentian Bank
Assuming the 90 days trading horizon Sun Life is expected to generate 1.07 times less return on investment than Laurentian Bank. But when comparing it to its historical volatility, Sun Life Financial is 1.0 times less risky than Laurentian Bank. It trades about 0.5 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest 2,625 in Laurentian Bank on September 2, 2024 and sell it today you would earn a total of 340.00 from holding Laurentian Bank or generate 12.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Life Financial vs. Laurentian Bank
Performance |
| Timeline |
| Sun Life Financial |
| Laurentian Bank |
Sun Life and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Life and Laurentian Bank
The main advantage of trading using opposite Sun Life and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank'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 |
| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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