Correlation Between Ayala Corp and Philex Mining

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

Diversification Opportunities for Ayala Corp and Philex Mining

0.06

Correlation Coefficient

Ayala Corp  Philex Mining

Significant diversification

The 3 months correlation between Ayala and Philex is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Corp and Philex Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philex 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 Philex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philex Mining Corp has no effect on the direction of Ayala Corp i.e., Ayala Corp and Philex Mining go up and down completely randomly.

Pair Corralation between Ayala Corp and Philex Mining

Assuming the 90 days trading horizon Ayala Corp is expected to under-perform the Philex Mining. But the stock apears to be less risky and, when comparing its historical volatility, Ayala Corp is 2.67 times less risky than Philex Mining. The stock trades about -0.05 of its potential returns per unit of risk. The Philex Mining Corp is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  278.00  in Philex Mining Corp on December 29, 2024 and sell it today you would earn a total of  442.00  from holding Philex Mining Corp or generate 158.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ayala Corp  vs.  Philex 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.

Philex Mining Corp

Risk-Adjusted Performance

Strong

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

Pair Trading with Ayala Corp and Philex Mining

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

The idea behind Ayala Corp and Philex 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.