Correlation Between Ayala and San Miguel

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

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

Diversification Opportunities for Ayala and San Miguel

-0.26

Correlation Coefficient

Ayala  San Miguel

Very good diversification

The 3 months correlation between Ayala and San is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and San Miguel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Miguel 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 San Miguel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Miguel has no effect on the direction of Ayala i.e., Ayala and San Miguel go up and down completely randomly.

Pair Corralation between Ayala and San Miguel

Assuming the 90 days horizon Ayala is expected to under-perform the San Miguel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ayala is 2.25 times less risky than San Miguel. The pink sheet trades about -0.13 of its potential returns per unit of risk. The San Miguel is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  153.00  in San Miguel on December 28, 2024 and sell it today you would lose (10.00) from holding San Miguel or give up 6.54% of portfolio value over 90 days.

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

Ayala  vs.  San Miguel

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.

San Miguel

Risk-Adjusted Performance

Very Weak

Over the last 90 days San Miguel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, San Miguel 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 San Miguel

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

The idea behind Ayala and San Miguel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.