Correlation Between Aecon and Sun Lif

Can any of the company-specific risk be diversified away by investing in both Aecon and Sun Lif 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 Aecon and Sun Lif into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aecon Group and Sun Lif Non, you can compare the effects of market volatilities on Aecon and Sun Lif 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 Aecon with a short position of Sun Lif. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aecon and Sun Lif.

Diversification Opportunities for Aecon and Sun Lif

-0.69

Correlation Coefficient

Aecon  Sun Lif

Excellent diversification

The 3 months correlation between Aecon and Sun is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aecon Group and Sun Lif Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Lif Non and Aecon 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 Aecon Group are associated (or correlated) with Sun Lif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Lif Non has no effect on the direction of Aecon i.e., Aecon and Sun Lif go up and down completely randomly.

Pair Corralation between Aecon and Sun Lif

Assuming the 90 days trading horizon Aecon Group is expected to under-perform the Sun Lif. In addition to that, Aecon is 2.24 times more volatile than Sun Lif Non. It trades about -0.2 of its total potential returns per unit of risk. Sun Lif Non is currently generating about 0.13 per unit of volatility. If you would invest  1,874  in Sun Lif Non on September 26, 2024 and sell it today you would earn a total of  35.00  from holding Sun Lif Non or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aecon Group  vs.  Sun Lif Non

Aecon Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Aecon displayed solid returns over the last few months and may actually be approaching a breakup point.

Sun Lif Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Lif Non has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sun Lif is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aecon and Sun Lif

The main advantage of trading using opposite Aecon and Sun Lif positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aecon position performs unexpectedly, Sun Lif 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 Sun Lif will offset losses from the drop in Sun Lif's long position.

The idea behind Aecon Group and Sun Lif Non 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.