Correlation Between Sun Life and National Bank

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

Diversification Opportunities for Sun Life and National Bank

0.65

Correlation Coefficient

Sun Life  National Bank

Poor diversification

The 3 months correlation between Sun and National is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Sun Life i.e., Sun Life and National Bank go up and down completely randomly.

Pair Corralation between Sun Life and National Bank

Assuming the 90 days trading horizon Sun Life Financial is expected to generate 1.23 times more return on investment than National Bank. However, Sun Life is 1.23 times more volatile than National Bank of. It trades about -0.04 of its potential returns per unit of risk. National Bank of is currently generating about -0.13 per unit of risk. If you would invest  8,431  in Sun Life Financial on December 29, 2024 and sell it today you would lose (319.00) from holding Sun Life Financial or give up 3.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sun Life Financial  vs.  National Bank of

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.

National Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sun Life and National Bank

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

The idea behind Sun Life Financial and National Bank of 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.