Correlation Between Aboitiz Equity and Philippine National

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

Diversification Opportunities for Aboitiz Equity and Philippine National

0.48

Correlation Coefficient

Aboitiz Equity  Philippine National

Very weak diversification

The 3 months correlation between Aboitiz and Philippine is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Aboitiz Equity Ventures and Philippine National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine National Bank 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 Philippine National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine National Bank has no effect on the direction of Aboitiz Equity i.e., Aboitiz Equity and Philippine National go up and down completely randomly.

Pair Corralation between Aboitiz Equity and Philippine National

Assuming the 90 days trading horizon Aboitiz Equity Ventures is expected to under-perform the Philippine National. In addition to that, Aboitiz Equity is 1.27 times more volatile than Philippine National Bank. It trades about -0.1 of its total potential returns per unit of risk. Philippine National Bank is currently generating about -0.03 per unit of volatility. If you would invest  2,730  in Philippine National Bank on September 24, 2024 and sell it today you would lose (90.00) from holding Philippine National Bank or give up 3.3% of portfolio value over 90 days.

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

Aboitiz Equity Ventures  vs.  Philippine National Bank

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Philippine National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aboitiz Equity and Philippine National

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

The idea behind Aboitiz Equity Ventures and Philippine National Bank 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.