Correlation Between Rizal Commercial and Sun Life

Can any of the company-specific risk be diversified away by investing in both Rizal Commercial 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 Rizal Commercial and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rizal Commercial Banking and Sun Life Financial, you can compare the effects of market volatilities on Rizal Commercial 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 Rizal Commercial with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rizal Commercial and Sun Life.

Diversification Opportunities for Rizal Commercial and Sun Life

-0.75

Correlation Coefficient

Rizal Commercial  Sun Life

Pay attention - limited upside

The 3 months correlation between Rizal and Sun is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking 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 Rizal Commercial 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 Rizal Commercial Banking 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 Rizal Commercial i.e., Rizal Commercial and Sun Life go up and down completely randomly.

Pair Corralation between Rizal Commercial and Sun Life

Assuming the 90 days trading horizon Rizal Commercial Banking is expected to generate 0.68 times more return on investment than Sun Life. However, Rizal Commercial Banking is 1.46 times less risky than Sun Life. It trades about 0.05 of its potential returns per unit of risk. Sun Life Financial is currently generating about -0.15 per unit of risk. If you would invest  2,440  in Rizal Commercial Banking on September 23, 2024 and sell it today you would earn a total of  55.00  from holding Rizal Commercial Banking or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	75.0%
Values	Daily Returns

Rizal Commercial Banking  vs.  Sun Life Financial

Rizal Commercial Banking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rizal Commercial Banking has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sun Life Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 2 (%) 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 January 2025.

Pair Trading with Rizal Commercial and Sun Life

The main advantage of trading using opposite Rizal Commercial and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rizal Commercial 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 Rizal Commercial Banking 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.