Correlation Between Sun Life and Cameco Corp

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

Diversification Opportunities for Sun Life and Cameco Corp

-0.6

Correlation Coefficient

Sun Life  Cameco Corp

Excellent diversification

The 3 months correlation between Sun and Cameco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Cameco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameco Corp 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 Cameco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameco Corp has no effect on the direction of Sun Life i.e., Sun Life and Cameco Corp go up and down completely randomly.

Pair Corralation between Sun Life and Cameco Corp

Assuming the 90 days trading horizon Sun Life is expected to generate 5610.0 times less return on investment than Cameco Corp. But when comparing it to its historical volatility, Sun Life Financial is 3.55 times less risky than Cameco Corp. It trades about 0.0 of its potential returns per unit of risk. Cameco Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,475  in Cameco Corp on September 17, 2024 and sell it today you would earn a total of  2,247  from holding Cameco Corp or generate 41.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Sun Life Financial  vs.  Cameco Corp

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

Cameco Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cameco Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Cameco Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Cameco Corp

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

The idea behind Sun Life Financial and Cameco Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.