Correlation Between Sun Life and CN MODERN

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

Diversification Opportunities for Sun Life and CN MODERN

-0.81

Correlation Coefficient

Sun Life  CN MODERN

Pay attention - limited upside

The 3 months correlation between Sun and 07M is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY 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 CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Sun Life i.e., Sun Life and CN MODERN go up and down completely randomly.

Pair Corralation between Sun Life and CN MODERN

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the CN MODERN. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 3.24 times less risky than CN MODERN. The stock trades about -0.11 of its potential returns per unit of risk. The CN MODERN DAIRY is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11.00  in CN MODERN DAIRY on December 19, 2024 and sell it today you would earn a total of  2.00  from holding CN MODERN DAIRY or generate 18.18% return on investment over 90 days.

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

Sun Life Financial  vs.  CN MODERN DAIRY

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CN MODERN DAIRY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and CN MODERN

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

The idea behind Sun Life Financial and CN MODERN DAIRY 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.