Correlation Between AyalaLand REIT and Philippine Savings

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

Diversification Opportunities for AyalaLand REIT and Philippine Savings

0.32

Correlation Coefficient

AyalaLand REIT  Philippine Savings

Weak diversification

The 3 months correlation between AyalaLand and Philippine is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding AyalaLand REIT and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings 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 Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of AyalaLand REIT i.e., AyalaLand REIT and Philippine Savings go up and down completely randomly.

Pair Corralation between AyalaLand REIT and Philippine Savings

Assuming the 90 days trading horizon AyalaLand REIT is expected to under-perform the Philippine Savings. But the stock apears to be less risky and, when comparing its historical volatility, AyalaLand REIT is 1.46 times less risky than Philippine Savings. The stock trades about -0.1 of its potential returns per unit of risk. The Philippine Savings Bank is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,000  in Philippine Savings Bank on September 26, 2024 and sell it today you would lose (190.00) from holding Philippine Savings Bank or give up 3.17% of portfolio value over 90 days.

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

AyalaLand REIT  vs.  Philippine Savings Bank

AyalaLand REIT

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AyalaLand REIT are ranked lower than 3 (%) 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 Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine Savings 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 Savings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AyalaLand REIT and Philippine Savings

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

The idea behind AyalaLand REIT and Philippine Savings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.