Correlation Between Intact Financial and Sun Life

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

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

Diversification Opportunities for Intact Financial and Sun Life

0.76

Correlation Coefficient

Intact Financial  Sun Life

Poor diversification

The 3 months correlation between Intact and Sun is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial 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 Intact Financial 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 Intact Financial 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 Intact Financial i.e., Intact Financial and Sun Life go up and down completely randomly.

Pair Corralation between Intact Financial and Sun Life

Assuming the 90 days trading horizon Intact Financial is expected to generate 2.33 times less return on investment than Sun Life. In addition to that, Intact Financial is 1.08 times more volatile than Sun Life Financial. It trades about 0.12 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  7,354  in Sun Life Financial on August 31, 2024 and sell it today you would earn a total of  1,208  from holding Sun Life Financial or generate 16.43% return on investment over 90 days.

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

Intact Financial  vs.  Sun Life Financial

Intact Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Intact Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sun Life Financial

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sun Life displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intact Financial and Sun Life

The main advantage of trading using opposite Intact Financial and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact Financial 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 Intact Financial 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.