Correlation Between AyalaLand REIT and Philippine National

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

By analyzing existing cross correlation between AyalaLand REIT and Philippine National Bank, you can compare the effects of market volatilities on AyalaLand REIT 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 AyalaLand REIT with a short position of Philippine National. Check out your portfolio center. Please also check ongoing floating volatility patterns of AyalaLand REIT and Philippine National.

Diversification Opportunities for AyalaLand REIT and Philippine National

0.02

Correlation Coefficient

AyalaLand REIT  Philippine National

Significant diversification

The 3 months correlation between AyalaLand and Philippine is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AyalaLand REIT 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 AyalaLand REIT 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 AyalaLand REIT 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 AyalaLand REIT i.e., AyalaLand REIT and Philippine National go up and down completely randomly.

Pair Corralation between AyalaLand REIT and Philippine National

Assuming the 90 days trading horizon AyalaLand REIT is expected to generate 1.67 times less return on investment than Philippine National. In addition to that, AyalaLand REIT is 1.17 times more volatile than Philippine National Bank. It trades about 0.04 of its total potential returns per unit of risk. Philippine National Bank is currently generating about 0.08 per unit of volatility. If you would invest  1,970  in Philippine National Bank on October 12, 2024 and sell it today you would earn a total of  1,040  from holding Philippine National Bank or generate 52.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

AyalaLand REIT  vs.  Philippine National Bank

AyalaLand REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AyalaLand REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AyalaLand REIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Philippine National Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine National Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AyalaLand REIT and Philippine National

The main advantage of trading using opposite AyalaLand REIT and Philippine National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AyalaLand REIT 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 AyalaLand REIT 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.