Correlation Between Sun Life and TC Energy

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

Diversification Opportunities for Sun Life and TC Energy

0.52

Correlation Coefficient

Sun Life  TC Energy

Very weak diversification

The 3 months correlation between Sun and TRS is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of Sun Life i.e., Sun Life and TC Energy go up and down completely randomly.

Pair Corralation between Sun Life and TC Energy

Assuming the 90 days horizon Sun Life is expected to generate 1.31 times less return on investment than TC Energy. But when comparing it to its historical volatility, Sun Life Financial is 1.21 times less risky than TC Energy. It trades about 0.03 of its potential returns per unit of risk. TC Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,962  in TC Energy on December 10, 2024 and sell it today you would earn a total of  225.00  from holding TC Energy or generate 5.68% return on investment over 90 days.

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

Sun Life Financial  vs.  TC Energy

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.

TC Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days TC Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sun Life and TC Energy

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

The idea behind Sun Life Financial and TC Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.