Correlation Between THE PHILIPPINE and Sun Life

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Can any of the company-specific risk be diversified away by investing in both THE PHILIPPINE 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 THE PHILIPPINE and Sun Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THE PHILIPPINE STOCK and Sun Life Financial, you can compare the effects of market volatilities on THE PHILIPPINE 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 THE PHILIPPINE with a short position of Sun Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of THE PHILIPPINE and Sun Life.

Diversification Opportunities for THE PHILIPPINE and Sun Life

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between THE and Sun is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK 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 THE PHILIPPINE 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 THE PHILIPPINE STOCK 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 THE PHILIPPINE i.e., THE PHILIPPINE and Sun Life go up and down completely randomly.
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Pair Corralation between THE PHILIPPINE and Sun Life

Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the Sun Life. But the index apears to be less risky and, when comparing its historical volatility, THE PHILIPPINE STOCK is 3.39 times less risky than Sun Life. The index trades about 0.0 of its potential returns per unit of risk. The Sun Life Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  273,375  in Sun Life Financial on August 25, 2024 and sell it today you would earn a total of  66,625  from holding Sun Life Financial or generate 24.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy83.15%
ValuesDaily Returns

THE PHILIPPINE STOCK  vs.  Sun Life Financial

 Performance 
       Timeline  

THE PHILIPPINE and Sun Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with THE PHILIPPINE and Sun Life

The main advantage of trading using opposite THE PHILIPPINE and Sun Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THE PHILIPPINE 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 THE PHILIPPINE STOCK 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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