Correlation Between IA Financial and Sun Lif

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

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

Diversification Opportunities for IA Financial and Sun Lif

-0.27

Correlation Coefficient

IA Financial  Sun Lif

Very good diversification

The 3 months correlation between IAG and Sun is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial 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 IA Financial 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 iA Financial 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 IA Financial i.e., IA Financial and Sun Lif go up and down completely randomly.

Pair Corralation between IA Financial and Sun Lif

Assuming the 90 days trading horizon iA Financial is expected to generate 1.78 times more return on investment than Sun Lif. However, IA Financial is 1.78 times more volatile than Sun Lif Non. It trades about 0.01 of its potential returns per unit of risk. Sun Lif Non is currently generating about -0.07 per unit of risk. If you would invest  12,976  in iA Financial on December 6, 2024 and sell it today you would lose (39.00) from holding iA Financial or give up 0.3% of portfolio value over 90 days.

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

iA Financial  vs.  Sun Lif Non

iA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IA Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sun Lif Non

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Sun Lif may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IA Financial and Sun Lif

The main advantage of trading using opposite IA Financial and Sun Lif positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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 iA Financial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.