Correlation Between Sun Life and Philippine National

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

Diversification Opportunities for Sun Life and Philippine National

-0.47

Correlation Coefficient

Sun Life  Philippine National

Very good diversification

The 3 months correlation between Sun and Philippine is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Philippine National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine National 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 Philippine National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine National Bank has no effect on the direction of Sun Life i.e., Sun Life and Philippine National go up and down completely randomly.

Pair Corralation between Sun Life and Philippine National

Assuming the 90 days trading horizon Sun Life Financial is expected to under-perform the Philippine National. In addition to that, Sun Life is 5.14 times more volatile than Philippine National Bank. It trades about -0.2 of its total potential returns per unit of risk. Philippine National Bank is currently generating about -0.05 per unit of volatility. If you would invest  2,665  in Philippine National Bank on September 24, 2024 and sell it today you would lose (25.00) from holding Philippine National Bank or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Sun Life Financial  vs.  Philippine National Bank

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.

Philippine National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine National Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Philippine National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sun Life and Philippine National

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

The idea behind Sun Life Financial and Philippine National 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.