Correlation Between Maple Leaf and Sun Life

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

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

Diversification Opportunities for Maple Leaf and Sun Life

-0.18

Correlation Coefficient

Maple Leaf  Sun Life

Good diversification

The 3 months correlation between Maple and Sun is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Maple Leaf 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 Maple Leaf Foods are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Maple Leaf i.e., Maple Leaf and Sun Life go up and down completely randomly.

Pair Corralation between Maple Leaf and Sun Life

Assuming the 90 days trading horizon Maple Leaf Foods is expected to generate 2.82 times more return on investment than Sun Life. However, Maple Leaf is 2.82 times more volatile than Sun Life Financial. It trades about 0.05 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.01 per unit of risk. If you would invest  2,167  in Maple Leaf Foods on September 13, 2024 and sell it today you would earn a total of  88.00  from holding Maple Leaf Foods or generate 4.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Maple Leaf Foods  vs.  Sun Life Financial

Maple Leaf Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Maple Leaf is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sun Life Financial

Risk-Adjusted Performance

0 of 100

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 somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Maple Leaf and Sun Life

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

The idea behind Maple Leaf Foods and Sun Life Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.