Correlation Between Erste Group and SUN LIFE

Can any of the company-specific risk be diversified away by investing in both Erste Group 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 Erste Group and SUN LIFE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erste Group Bank and SUN LIFE FINANCIAL, you can compare the effects of market volatilities on Erste Group 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 Erste Group with a short position of SUN LIFE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and SUN LIFE.

Diversification Opportunities for Erste Group and SUN LIFE

0.67

Correlation Coefficient

Erste Group  SUN LIFE

Poor diversification

The 3 months correlation between Erste and SUN is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank 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 Erste Group 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 Erste Group Bank 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 Erste Group i.e., Erste Group and SUN LIFE go up and down completely randomly.

Pair Corralation between Erste Group and SUN LIFE

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.9 times more return on investment than SUN LIFE. However, Erste Group is 1.9 times more volatile than SUN LIFE FINANCIAL. It trades about 0.3 of its potential returns per unit of risk. SUN LIFE FINANCIAL is currently generating about -0.3 per unit of risk. If you would invest  5,492  in Erste Group Bank on October 10, 2024 and sell it today you would earn a total of  364.00  from holding Erste Group Bank or generate 6.63% return on investment over 90 days.

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

Erste Group Bank  vs.  SUN LIFE FINANCIAL

Erste Group Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

SUN LIFE FINANCIAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUN LIFE FINANCIAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SUN LIFE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Erste Group and SUN LIFE

The main advantage of trading using opposite Erste Group and SUN LIFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group 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 Erste Group Bank 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.