Correlation Between Sun Lif and Imperial Oil

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Can any of the company-specific risk be diversified away by investing in both Sun Lif and Imperial Oil 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 Lif and Imperial Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Lif Non and Imperial Oil, you can compare the effects of market volatilities on Sun Lif and Imperial Oil 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 Lif with a short position of Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Lif and Imperial Oil.

Diversification Opportunities for Sun Lif and Imperial Oil

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sun and Imperial is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sun Lif Non and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Sun Lif 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 Lif Non are associated (or correlated) with Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Sun Lif i.e., Sun Lif and Imperial Oil go up and down completely randomly.

Pair Corralation between Sun Lif and Imperial Oil

Assuming the 90 days trading horizon Sun Lif is expected to generate 2.12 times less return on investment than Imperial Oil. But when comparing it to its historical volatility, Sun Lif Non is 1.79 times less risky than Imperial Oil. It trades about 0.09 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,725  in Imperial Oil on September 6, 2024 and sell it today you would earn a total of  304.00  from holding Imperial Oil or generate 3.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sun Lif Non  vs.  Imperial Oil

 Performance 
       Timeline  
Sun Lif Non 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Imperial Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sun Lif and Imperial Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Lif and Imperial Oil

The main advantage of trading using opposite Sun Lif and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Lif position performs unexpectedly, Imperial Oil 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 Imperial Oil will offset losses from the drop in Imperial Oil's long position.
The idea behind Sun Lif Non and Imperial Oil 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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