Correlation Between Alliance Global and DMCI Holdings

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

By analyzing existing cross correlation between Alliance Global Group and DMCI Holdings, you can compare the effects of market volatilities on Alliance Global and DMCI Holdings 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 Alliance Global with a short position of DMCI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Global and DMCI Holdings.

Diversification Opportunities for Alliance Global and DMCI Holdings

0.85

Correlation Coefficient

Alliance Global  DMCI Holdings

Very poor diversification

The 3 months correlation between Alliance and DMCI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Global Group and DMCI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings and Alliance Global 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 Alliance Global Group are associated (or correlated) with DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings has no effect on the direction of Alliance Global i.e., Alliance Global and DMCI Holdings go up and down completely randomly.

Pair Corralation between Alliance Global and DMCI Holdings

Assuming the 90 days trading horizon Alliance Global Group is expected to under-perform the DMCI Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Alliance Global Group is 1.33 times less risky than DMCI Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The DMCI Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,121  in DMCI Holdings on September 24, 2024 and sell it today you would lose (89.00) from holding DMCI Holdings or give up 7.94% of portfolio value over 90 days.

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

Alliance Global Group  vs.  DMCI Holdings

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group 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.

DMCI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DMCI Holdings 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.

Pair Trading with Alliance Global and DMCI Holdings

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

The idea behind Alliance Global Group and DMCI Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.