Correlation Between Sun Life and SunOpta

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

Diversification Opportunities for Sun Life and SunOpta

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sun and SunOpta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta 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 SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of Sun Life i.e., Sun Life and SunOpta go up and down completely randomly.

Pair Corralation between Sun Life and SunOpta

Considering the 90-day investment horizon Sun Life Financial is expected to under-perform the SunOpta. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.73 times less risky than SunOpta. The stock trades about -0.06 of its potential returns per unit of risk. The SunOpta is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  745.00  in SunOpta on September 19, 2024 and sell it today you would earn a total of  41.00  from holding SunOpta or generate 5.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sun Life Financial  vs.  SunOpta

 Performance 
       Timeline  
Sun Life Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
SunOpta 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile forward-looking signals, SunOpta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sun Life and SunOpta Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Life and SunOpta

The main advantage of trading using opposite Sun Life and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, SunOpta 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 SunOpta will offset losses from the drop in SunOpta's long position.
The idea behind Sun Life Financial and SunOpta 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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