Correlation Between Asia United and Aboitiz Equity

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

Diversification Opportunities for Asia United and Aboitiz Equity

-0.68

Correlation Coefficient

Asia United  Aboitiz Equity

Excellent diversification

The 3 months correlation between Asia and Aboitiz is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Asia United Bank and Aboitiz Equity Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aboitiz Equity Ventures 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 Aboitiz Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aboitiz Equity Ventures has no effect on the direction of Asia United i.e., Asia United and Aboitiz Equity go up and down completely randomly.

Pair Corralation between Asia United and Aboitiz Equity

Assuming the 90 days trading horizon Asia United Bank is expected to under-perform the Aboitiz Equity. But the stock apears to be less risky and, when comparing its historical volatility, Asia United Bank is 1.42 times less risky than Aboitiz Equity. The stock trades about -0.07 of its potential returns per unit of risk. The Aboitiz Equity Ventures is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,430  in Aboitiz Equity Ventures on September 27, 2024 and sell it today you would lose (60.00) from holding Aboitiz Equity Ventures or give up 1.75% of portfolio value over 90 days.

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

Asia United Bank  vs.  Aboitiz Equity Ventures

Asia United Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 18 (%) 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.

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.

Pair Trading with Asia United and Aboitiz Equity

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

The idea behind Asia United Bank and Aboitiz Equity Ventures 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.