Correlation Between E-L Financial and Sun Life

Can any of the company-specific risk be diversified away by investing in both E-L 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 E-L 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 E L Financial Corp and Sun Life Financial, you can compare the effects of market volatilities on E-L 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 E-L Financial with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of E-L Financial and Sun Life.

Diversification Opportunities for E-L Financial and Sun Life

0.77

Correlation Coefficient

E-L Financial  Sun Life

Poor diversification

The 3 months correlation between E-L and Sun is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp 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 E-L 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 E L Financial Corp 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 E-L Financial i.e., E-L Financial and Sun Life go up and down completely randomly.

Pair Corralation between E-L Financial and Sun Life

Assuming the 90 days trading horizon E-L Financial is expected to generate 1.2 times less return on investment than Sun Life. But when comparing it to its historical volatility, E L Financial Corp is 1.3 times less risky than Sun Life. It trades about 0.13 of its potential returns per unit of risk. Sun Life Financial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,034  in Sun Life Financial on July 1, 2025 and sell it today you would earn a total of  92.00  from holding Sun Life Financial or generate 4.52% return on investment over 90 days.

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

E L Financial Corp  vs.  Sun Life Financial

E L Financial

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E-L Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Sun Life Financial

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sun Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with E-L Financial and Sun Life

The main advantage of trading using opposite E-L Financial and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E-L 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 E L Financial Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.