Correlation Between Sun Life and Canso Select

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

Diversification Opportunities for Sun Life and Canso Select

-0.02

Correlation Coefficient

Sun Life  Canso Select

Good diversification

The 3 months correlation between Sun and Canso is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Canso Select Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Select Opportu 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 Canso Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Select Opportu has no effect on the direction of Sun Life i.e., Sun Life and Canso Select go up and down completely randomly.

Pair Corralation between Sun Life and Canso Select

Assuming the 90 days trading horizon Sun Life Financial is expected to generate 0.39 times more return on investment than Canso Select. However, Sun Life Financial is 2.57 times less risky than Canso Select. It trades about 0.05 of its potential returns per unit of risk. Canso Select Opportunities is currently generating about 0.01 per unit of risk. If you would invest  1,986  in Sun Life Financial on December 30, 2024 and sell it today you would earn a total of  43.00  from holding Sun Life Financial or generate 2.17% return on investment over 90 days.

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

Sun Life Financial  vs.  Canso Select Opportunities

Sun Life Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Canso Select Opportu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canso Select Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Canso Select is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sun Life and Canso Select

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

The idea behind Sun Life Financial and Canso Select Opportunities 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.