Correlation Between Sun Life and Enbridge Pref

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

By analyzing existing cross correlation between Sun Life Non and Enbridge Pref 13, you can compare the effects of market volatilities on Sun Life and Enbridge Pref 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 Enbridge Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Enbridge Pref.

Diversification Opportunities for Sun Life and Enbridge Pref

0.76

Correlation Coefficient

Sun Life  Enbridge Pref

Poor diversification

The 3 months correlation between Sun and Enbridge is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Non and Enbridge Pref 13 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge Pref 13 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 Non are associated (or correlated) with Enbridge Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge Pref 13 has no effect on the direction of Sun Life i.e., Sun Life and Enbridge Pref go up and down completely randomly.

Pair Corralation between Sun Life and Enbridge Pref

Assuming the 90 days trading horizon Sun Life Non is expected to under-perform the Enbridge Pref. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Non is 1.07 times less risky than Enbridge Pref. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Enbridge Pref 13 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,730  in Enbridge Pref 13 on October 4, 2024 and sell it today you would earn a total of  192.00  from holding Enbridge Pref 13 or generate 11.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.75%
Values	Daily Returns

Sun Life Non  vs.  Enbridge Pref 13

Sun Life Non

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Non are ranked lower than 11 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Enbridge Pref 13

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 13 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sun Life and Enbridge Pref

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

The idea behind Sun Life Non and Enbridge Pref 13 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.