Correlation Between Ayala and RCABS

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

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

Diversification Opportunities for Ayala and RCABS

0.84

Correlation Coefficient

Ayala  RCABS

Very poor diversification

The 3 months correlation between Ayala and RCABS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc and Ayala 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 Ayala are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Ayala i.e., Ayala and RCABS go up and down completely randomly.

Pair Corralation between Ayala and RCABS

Assuming the 90 days horizon Ayala is expected to under-perform the RCABS. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ayala is 5.58 times less risky than RCABS. The pink sheet trades about -0.13 of its potential returns per unit of risk. The RCABS Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.07  in RCABS Inc on December 28, 2024 and sell it today you would earn a total of  0.00  from holding RCABS Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Ayala  vs.  RCABS Inc

Ayala

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

RCABS Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCABS Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RCABS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ayala and RCABS

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

The idea behind Ayala and RCABS Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.