Correlation Between PT Bank and SUN LIFE

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

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

Diversification Opportunities for PT Bank and SUN LIFE

-0.74

Correlation Coefficient

PT Bank  SUN LIFE

Pay attention - limited upside

The 3 months correlation between PQ9 and SUN is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri 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 PT Bank 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 PT Bank Mandiri 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 PT Bank i.e., PT Bank and SUN LIFE go up and down completely randomly.

Pair Corralation between PT Bank and SUN LIFE

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the SUN LIFE. In addition to that, PT Bank is 3.77 times more volatile than SUN LIFE FINANCIAL. It trades about -0.04 of its total potential returns per unit of risk. SUN LIFE FINANCIAL is currently generating about 0.25 per unit of volatility. If you would invest  5,027  in SUN LIFE FINANCIAL on October 6, 2024 and sell it today you would earn a total of  673.00  from holding SUN LIFE FINANCIAL or generate 13.39% return on investment over 90 days.

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

PT Bank Mandiri  vs.  SUN LIFE FINANCIAL

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SUN LIFE FINANCIAL

Risk-Adjusted Performance

9 of 100

OK

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. In spite of rather fragile 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 PT Bank and SUN LIFE

The main advantage of trading using opposite PT Bank and SUN LIFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Mandiri 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.