Correlation Between Sun Life and TFI International

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

Diversification Opportunities for Sun Life and TFI International

-0.54

Correlation Coefficient

Sun Life  TFI International

Excellent diversification

The 3 months correlation between Sun and TFI is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Sun Life i.e., Sun Life and TFI International go up and down completely randomly.

Pair Corralation between Sun Life and TFI International

Assuming the 90 days trading horizon Sun Life is expected to generate 3.0 times less return on investment than TFI International. But when comparing it to its historical volatility, Sun Life Financial is 2.14 times less risky than TFI International. It trades about 0.04 of its potential returns per unit of risk. TFI International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13,324  in TFI International on September 26, 2024 and sell it today you would earn a total of  6,987  from holding TFI International or generate 52.44% return on investment over 90 days.

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

Sun Life Financial  vs.  TFI International

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

TFI International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TFI International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sun Life and TFI International

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

The idea behind Sun Life Financial and TFI International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.