Correlation Between Sun Life and Ensign Energy

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

Diversification Opportunities for Sun Life and Ensign Energy

-0.79

Correlation Coefficient

Sun Life  Ensign Energy

Pay attention - limited upside

The 3 months correlation between Sun and Ensign is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Ensign Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Energy Services 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 Ensign Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Energy Services has no effect on the direction of Sun Life i.e., Sun Life and Ensign Energy go up and down completely randomly.

Pair Corralation between Sun Life and Ensign Energy

Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the Ensign Energy. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 3.03 times less risky than Ensign Energy. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Ensign Energy Services is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Ensign Energy Services on September 3, 2024 and sell it today you would earn a total of  50.00  from holding Ensign Energy Services or generate 20.41% return on investment over 90 days.

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

Sun Life Financial  vs.  Ensign Energy Services

Sun Life Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ensign Energy Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ensign Energy Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Ensign Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Ensign Energy

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

The idea behind Sun Life Financial and Ensign Energy Services 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.