Correlation Between Aboitiz Equity and Lepanto Consolidated

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

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

Diversification Opportunities for Aboitiz Equity and Lepanto Consolidated

0.66

Correlation Coefficient

Aboitiz Equity  Lepanto Consolidated

Poor diversification

The 3 months correlation between Aboitiz and Lepanto is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aboitiz Equity Ventures and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated and Aboitiz Equity 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 Aboitiz Equity Ventures are associated (or correlated) with Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Aboitiz Equity i.e., Aboitiz Equity and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Aboitiz Equity and Lepanto Consolidated

Assuming the 90 days trading horizon Aboitiz Equity Ventures is expected to under-perform the Lepanto Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Aboitiz Equity Ventures is 1.49 times less risky than Lepanto Consolidated. The stock trades about -0.04 of its potential returns per unit of risk. The Lepanto Consolidated Mining is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Lepanto Consolidated Mining on October 13, 2024 and sell it today you would lose (5.10) from holding Lepanto Consolidated Mining or give up 42.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Aboitiz Equity Ventures  vs.  Lepanto Consolidated Mining

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepanto Consolidated Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aboitiz Equity and Lepanto Consolidated

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

The idea behind Aboitiz Equity Ventures and Lepanto Consolidated Mining 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.