Correlation Between Agro Capital and Ayala

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

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

Diversification Opportunities for Agro Capital and Ayala

-0.08

Correlation Coefficient

Agro Capital  Ayala

Good diversification

The 3 months correlation between Agro and Ayala is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Agro Capital Management and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala and Agro Capital 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 Agro Capital Management are associated (or correlated) with Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of Agro Capital i.e., Agro Capital and Ayala go up and down completely randomly.

Pair Corralation between Agro Capital and Ayala

Given the investment horizon of 90 days Agro Capital Management is expected to generate 9.7 times more return on investment than Ayala. However, Agro Capital is 9.7 times more volatile than Ayala. It trades about 0.14 of its potential returns per unit of risk. Ayala is currently generating about -0.13 per unit of risk. If you would invest  2.25  in Agro Capital Management on December 28, 2024 and sell it today you would earn a total of  1.89  from holding Agro Capital Management or generate 84.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Agro Capital Management  vs.  Ayala

Agro Capital Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Capital Management are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Agro Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Ayala

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Agro Capital and Ayala

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

The idea behind Agro Capital Management and Ayala 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.