Correlation Between Ayala and DMCI Holdings

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

By analyzing existing cross correlation between Ayala and DMCI Holdings ADR, you can compare the effects of market volatilities on Ayala and DMCI Holdings 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 DMCI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ayala and DMCI Holdings.

Diversification Opportunities for Ayala and DMCI Holdings

0.03

Correlation Coefficient

Ayala  DMCI Holdings

Significant diversification

The 3 months correlation between Ayala and DMCI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and DMCI Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings ADR 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 DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings ADR has no effect on the direction of Ayala i.e., Ayala and DMCI Holdings go up and down completely randomly.

Pair Corralation between Ayala and DMCI Holdings

Assuming the 90 days horizon Ayala is expected to generate 15.27 times more return on investment than DMCI Holdings. However, Ayala is 15.27 times more volatile than DMCI Holdings ADR. It trades about 0.13 of its potential returns per unit of risk. DMCI Holdings ADR is currently generating about 0.0 per unit of risk. If you would invest  1,005  in Ayala on September 1, 2024 and sell it today you would earn a total of  130.00  from holding Ayala or generate 12.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.08%
Values	Daily Returns

Ayala  vs.  DMCI Holdings ADR

Ayala

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ayala are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Ayala reported solid returns over the last few months and may actually be approaching a breakup point.

DMCI Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DMCI Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, DMCI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ayala and DMCI Holdings

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

The idea behind Ayala and DMCI Holdings ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.