Correlation Between Ayala and Arca Continental

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

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

Diversification Opportunities for Ayala and Arca Continental

-0.16

Correlation Coefficient

Ayala  Arca Continental

Good diversification

The 3 months correlation between Ayala and Arca is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Ayala i.e., Ayala and Arca Continental go up and down completely randomly.

Pair Corralation between Ayala and Arca Continental

Assuming the 90 days horizon Ayala is expected to generate 0.74 times more return on investment than Arca Continental. However, Ayala is 1.35 times less risky than Arca Continental. It trades about 0.13 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.04 per unit of risk. If you would invest  1,005  in Ayala on September 13, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ayala  vs.  Arca Continental SAB

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.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ayala and Arca Continental

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

The idea behind Ayala and Arca Continental SAB 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..