Correlation Between SUN LIFE and LEEF BRANDS

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

Diversification Opportunities for SUN LIFE and LEEF BRANDS

0.44

Correlation Coefficient

SUN LIFE  LEEF BRANDS

Very weak diversification

The 3 months correlation between SUN and LEEF is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SUN LIFE FINANCIAL and LEEF BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEEF BRANDS INC 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 LEEF BRANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEEF BRANDS INC has no effect on the direction of SUN LIFE i.e., SUN LIFE and LEEF BRANDS go up and down completely randomly.

Pair Corralation between SUN LIFE and LEEF BRANDS

Assuming the 90 days trading horizon SUN LIFE is expected to generate 167.08 times less return on investment than LEEF BRANDS. But when comparing it to its historical volatility, SUN LIFE FINANCIAL is 108.99 times less risky than LEEF BRANDS. It trades about 0.1 of its potential returns per unit of risk. LEEF BRANDS INC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  12.00  in LEEF BRANDS INC on October 9, 2024 and sell it today you would earn a total of  7.00  from holding LEEF BRANDS INC or generate 58.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

SUN LIFE FINANCIAL  vs.  LEEF BRANDS INC

SUN LIFE FINANCIAL

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SUN LIFE FINANCIAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SUN LIFE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LEEF BRANDS INC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LEEF BRANDS INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, LEEF BRANDS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SUN LIFE and LEEF BRANDS

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

The idea behind SUN LIFE FINANCIAL and LEEF BRANDS INC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.