Correlation Between Sun Life and Intact Financial

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

Diversification Opportunities for Sun Life and Intact Financial

0.5

Correlation Coefficient

Sun Life  Intact Financial

Very weak diversification

The 3 months correlation between Sun and Intact is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of Sun Life i.e., Sun Life and Intact Financial go up and down completely randomly.

Pair Corralation between Sun Life and Intact Financial

Assuming the 90 days trading horizon Sun Life Financial is expected to generate 0.93 times more return on investment than Intact Financial. However, Sun Life Financial is 1.08 times less risky than Intact Financial. It trades about 0.09 of its potential returns per unit of risk. Intact Financial is currently generating about 0.07 per unit of risk. If you would invest  5,808  in Sun Life Financial on September 22, 2024 and sell it today you would earn a total of  2,657  from holding Sun Life Financial or generate 45.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Sun Life Financial  vs.  Intact Financial

Sun Life Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Intact Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Intact Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sun Life and Intact Financial

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

The idea behind Sun Life Financial and Intact Financial 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.