Correlation Between SUN LIFE and Magna International

Can any of the company-specific risk be diversified away by investing in both SUN LIFE and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on SUN LIFE and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN LIFE and Magna International.

Diversification Opportunities for SUN LIFE and Magna International

0.85

Correlation Coefficient

SUN LIFE  Magna International

Very poor diversification

The 3 months correlation between SUN and Magna is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of SUN LIFE i.e., SUN LIFE and Magna International go up and down completely randomly.

Pair Corralation between SUN LIFE and Magna International

Assuming the 90 days trading horizon SUN LIFE FINANCIAL is expected to generate 0.61 times more return on investment than Magna International. However, SUN LIFE FINANCIAL is 1.63 times less risky than Magna International. It trades about -0.09 of its potential returns per unit of risk. Magna International is currently generating about -0.13 per unit of risk. If you would invest  5,542  in SUN LIFE FINANCIAL on December 19, 2024 and sell it today you would lose (392.00) from holding SUN LIFE FINANCIAL or give up 7.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

SUN LIFE FINANCIAL  vs.  Magna International

SUN LIFE FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUN LIFE FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Magna International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SUN LIFE and Magna International

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

The idea behind SUN LIFE FINANCIAL and Magna International 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.