Correlation Between Sun Life and Terreno Resources
Can any of the company-specific risk be diversified away by investing in both Sun Life and Terreno Resources 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 Terreno Resources 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 Terreno Resources Corp, you can compare the effects of market volatilities on Sun Life and Terreno Resources 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 Terreno Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Terreno Resources.
Diversification Opportunities for Sun Life and Terreno Resources
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sun and Terreno is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Terreno Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Resources Corp 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 Terreno Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Resources Corp has no effect on the direction of Sun Life i.e., Sun Life and Terreno Resources go up and down completely randomly.
Pair Corralation between Sun Life and Terreno Resources
Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the Terreno Resources. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 40.94 times less risky than Terreno Resources. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Terreno Resources Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Terreno Resources Corp on September 5, 2024 and sell it today you would lose (1.00) from holding Terreno Resources Corp or give up 50.0% 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. Terreno Resources Corp
Performance |
Timeline |
Sun Life Financial |
Terreno Resources Corp |
Sun Life and Terreno Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sun Life and Terreno Resources
The main advantage of trading using opposite Sun Life and Terreno Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Terreno Resources 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 Terreno Resources will offset losses from the drop in Terreno Resources' long position.Sun Life vs. BMO Aggregate Bond | Sun Life vs. Terreno Resources Corp | Sun Life vs. iShares Canadian HYBrid | Sun Life vs. Brompton European Dividend |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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