Correlation Between Postmedia Network and Sun Life

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

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

Diversification Opportunities for Postmedia Network and Sun Life

0.35

Correlation Coefficient

Postmedia Network  Sun Life

Weak diversification

The 3 months correlation between Postmedia and Sun is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada 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 Postmedia Network 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 Postmedia Network Canada 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 Postmedia Network i.e., Postmedia Network and Sun Life go up and down completely randomly.

Pair Corralation between Postmedia Network and Sun Life

Assuming the 90 days trading horizon Postmedia Network Canada is expected to generate 2.91 times more return on investment than Sun Life. However, Postmedia Network is 2.91 times more volatile than Sun Life Financial. It trades about -0.01 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.02 per unit of risk. If you would invest  129.00  in Postmedia Network Canada on September 12, 2024 and sell it today you would lose (4.00) from holding Postmedia Network Canada or give up 3.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Postmedia Network Canada  vs.  Sun Life Financial

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Postmedia Network is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sun Life Financial

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Postmedia Network and Sun Life

The main advantage of trading using opposite Postmedia Network and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postmedia Network 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 Postmedia Network Canada 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.