Correlation Between Ayala Corp and Manila Mining

Can any of the company-specific risk be diversified away by investing in both Ayala Corp and Manila Mining 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 Ayala Corp and Manila Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ayala Corp and Manila Mining Corp, you can compare the effects of market volatilities on Ayala Corp and Manila Mining 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 Ayala Corp with a short position of Manila Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ayala Corp and Manila Mining.

Diversification Opportunities for Ayala Corp and Manila Mining

0.21

Correlation Coefficient

Ayala Corp  Manila Mining

Modest diversification

The 3 months correlation between Ayala and Manila is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Corp and Manila Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Mining Corp and Ayala Corp 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 Ayala Corp are associated (or correlated) with Manila Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Mining Corp has no effect on the direction of Ayala Corp i.e., Ayala Corp and Manila Mining go up and down completely randomly.

Pair Corralation between Ayala Corp and Manila Mining

Assuming the 90 days trading horizon Ayala Corp is expected to under-perform the Manila Mining. But the stock apears to be less risky and, when comparing its historical volatility, Ayala Corp is 4.57 times less risky than Manila Mining. The stock trades about -0.05 of its potential returns per unit of risk. The Manila Mining Corp is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Manila Mining Corp on December 30, 2024 and sell it today you would earn a total of  0.49  from holding Manila Mining Corp or generate 181.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.52%
Values	Daily Returns

Ayala Corp  vs.  Manila Mining Corp

Ayala Corp

Risk-Adjusted Performance

Very Weak

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

Manila Mining Corp

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Manila Mining Corp are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Manila Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ayala Corp and Manila Mining

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

The idea behind Ayala Corp and Manila Mining Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.