Correlation Between Sun Life and Bumitama Agri

Can any of the company-specific risk be diversified away by investing in both Sun Life and Bumitama Agri 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 Bumitama Agri 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 Bumitama Agri, you can compare the effects of market volatilities on Sun Life and Bumitama Agri 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 Bumitama Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Life and Bumitama Agri.

Diversification Opportunities for Sun Life and Bumitama Agri

0.28

Correlation Coefficient

Sun Life  Bumitama Agri

Modest diversification

The 3 months correlation between Sun and Bumitama is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Bumitama Agri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumitama Agri 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 Bumitama Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumitama Agri has no effect on the direction of Sun Life i.e., Sun Life and Bumitama Agri go up and down completely randomly.

Pair Corralation between Sun Life and Bumitama Agri

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the Bumitama Agri. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.65 times less risky than Bumitama Agri. The stock trades about -0.11 of its potential returns per unit of risk. The Bumitama Agri is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Bumitama Agri on December 20, 2024 and sell it today you would lose (1.00) from holding Bumitama Agri or give up 1.72% of portfolio value over 90 days.

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

Sun Life Financial  vs.  Bumitama Agri

Sun Life Financial

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bumitama Agri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bumitama Agri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bumitama Agri is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sun Life and Bumitama Agri

The main advantage of trading using opposite Sun Life and Bumitama Agri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Bumitama Agri 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 Bumitama Agri will offset losses from the drop in Bumitama Agri's long position.

The idea behind Sun Life Financial and Bumitama Agri 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.