Correlation Between Sun Life and Erste Group

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

Diversification Opportunities for Sun Life and Erste Group

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sun and Erste is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Sun Life i.e., Sun Life and Erste Group go up and down completely randomly.

Pair Corralation between Sun Life and Erste Group

Assuming the 90 days horizon Sun Life Financial is expected to under-perform the Erste Group. But the stock apears to be less risky and, when comparing its historical volatility, Sun Life Financial is 1.97 times less risky than Erste Group. The stock trades about -0.24 of its potential returns per unit of risk. The Erste Group Bank is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,492  in Erste Group Bank on October 9, 2024 and sell it today you would earn a total of  328.00  from holding Erste Group Bank or generate 5.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sun Life Financial  vs.  Erste Group Bank

 Performance 
       Timeline  
Sun Life Financial 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Erste Group Bank 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
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 and Erste Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Life and Erste Group

The main advantage of trading using opposite Sun Life and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.
The idea behind Sun Life Financial and Erste Group Bank 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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