Correlation Between Sun Life and Rizal Commercial

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

Diversification Opportunities for Sun Life and Rizal Commercial

-0.75

Correlation Coefficient

Sun Life  Rizal Commercial

Pay attention - limited upside

The 3 months correlation between Sun and Rizal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Rizal Commercial Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rizal Commercial Banking 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 Rizal Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rizal Commercial Banking has no effect on the direction of Sun Life i.e., Sun Life and Rizal Commercial go up and down completely randomly.

Pair Corralation between Sun Life and Rizal Commercial

Assuming the 90 days trading horizon Sun Life Financial is expected to generate 1.47 times more return on investment than Rizal Commercial. However, Sun Life is 1.47 times more volatile than Rizal Commercial Banking. It trades about 0.04 of its potential returns per unit of risk. Rizal Commercial Banking is currently generating about 0.03 per unit of risk. If you would invest  257,940  in Sun Life Financial on September 23, 2024 and sell it today you would earn a total of  42,660  from holding Sun Life Financial or generate 16.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.43%
Values	Daily Returns

Sun Life Financial  vs.  Rizal Commercial Banking

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.

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.

Pair Trading with Sun Life and Rizal Commercial

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

The idea behind Sun Life Financial and Rizal Commercial Banking 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.