Correlation Between Talon Metals and Sun Life

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

By analyzing existing cross correlation between Talon Metals Corp and Sun Life Financial, you can compare the effects of market volatilities on Talon Metals and Sun Life 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 Talon Metals with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talon Metals and Sun Life.

Diversification Opportunities for Talon Metals and Sun Life

0.27

Correlation Coefficient

Talon Metals  Sun Life

Modest diversification

The 3 months correlation between Talon and Sun is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial and Talon Metals 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 Talon Metals Corp are associated (or correlated) with Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Talon Metals i.e., Talon Metals and Sun Life go up and down completely randomly.

Pair Corralation between Talon Metals and Sun Life

Assuming the 90 days trading horizon Talon Metals Corp is expected to under-perform the Sun Life. In addition to that, Talon Metals is 11.94 times more volatile than Sun Life Financial. It trades about -0.04 of its total potential returns per unit of risk. Sun Life Financial is currently generating about 0.31 per unit of volatility. If you would invest  2,008  in Sun Life Financial on October 25, 2024 and sell it today you would earn a total of  82.00  from holding Sun Life Financial or generate 4.08% return on investment over 90 days.

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

Talon Metals Corp  vs.  Sun Life Financial

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

Sun Life Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 4 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Talon Metals and Sun Life

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

The idea behind Talon Metals Corp and Sun Life 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.