Correlation Between IShares Canadian and Sun Life

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

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

Diversification Opportunities for IShares Canadian and Sun Life

-0.45

Correlation Coefficient

IShares Canadian  Sun Life

Very good diversification

The 3 months correlation between IShares and Sun is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid 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 IShares Canadian 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 iShares Canadian HYBrid 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 IShares Canadian i.e., IShares Canadian and Sun Life go up and down completely randomly.

Pair Corralation between IShares Canadian and Sun Life

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.35 times more return on investment than Sun Life. However, iShares Canadian HYBrid is 2.84 times less risky than Sun Life. It trades about 0.19 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.05 per unit of risk. If you would invest  1,927  in iShares Canadian HYBrid on September 3, 2024 and sell it today you would earn a total of  66.00  from holding iShares Canadian HYBrid or generate 3.43% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Sun Life Financial

iShares Canadian HYBrid

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with IShares Canadian and Sun Life

The main advantage of trading using opposite IShares Canadian and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian 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 iShares Canadian HYBrid 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.