Correlation Between Asia United and Ayala Corp

Can any of the company-specific risk be diversified away by investing in both Asia United and Ayala Corp 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 Asia United and Ayala Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Asia United and Ayala Corp

-0.64

Correlation Coefficient

Asia United  Ayala Corp

Excellent diversification

The 3 months correlation between Asia and Ayala is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Asia United Bank and Ayala Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp and Asia United 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 Asia United Bank are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp has no effect on the direction of Asia United i.e., Asia United and Ayala Corp go up and down completely randomly.

Pair Corralation between Asia United and Ayala Corp

Assuming the 90 days trading horizon Asia United Bank is expected to generate 0.91 times more return on investment than Ayala Corp. However, Asia United Bank is 1.1 times less risky than Ayala Corp. It trades about 0.23 of its potential returns per unit of risk. Ayala Corp is currently generating about -0.02 per unit of risk. If you would invest  3,187  in Asia United Bank on October 24, 2024 and sell it today you would earn a total of  4,073  from holding Asia United Bank or generate 127.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

Asia United Bank  vs.  Ayala Corp

Asia United Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Asia United exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ayala Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ayala Corp 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 Asia United and Ayala Corp

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

The idea behind Asia United Bank and Ayala Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.