Correlation Between Sun Life and AltaGas

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

Diversification Opportunities for Sun Life and AltaGas

-0.49

Correlation Coefficient

Sun Life  AltaGas

Very good diversification

The 3 months correlation between Sun and AltaGas is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas 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 AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Sun Life i.e., Sun Life and AltaGas go up and down completely randomly.

Pair Corralation between Sun Life and AltaGas

Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the AltaGas. In addition to that, Sun Life is 1.19 times more volatile than AltaGas. It trades about -0.04 of its total potential returns per unit of risk. AltaGas is currently generating about 0.26 per unit of volatility. If you would invest  3,292  in AltaGas on December 26, 2024 and sell it today you would earn a total of  613.00  from holding AltaGas or generate 18.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sun Life Financial  vs.  AltaGas

Sun Life Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

AltaGas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AltaGas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and AltaGas

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

The idea behind Sun Life Financial and AltaGas 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.