Correlation Between Ayala and Steel Partners

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

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

Diversification Opportunities for Ayala and Steel Partners

0.47

Correlation Coefficient

Ayala  Steel Partners

Very weak diversification

The 3 months correlation between Ayala and Steel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners Holdings 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of Ayala i.e., Ayala and Steel Partners go up and down completely randomly.

Pair Corralation between Ayala and Steel Partners

Assuming the 90 days horizon Ayala is expected to generate 0.53 times more return on investment than Steel Partners. However, Ayala is 1.9 times less risky than Steel Partners. It trades about 0.13 of its potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.02 per unit of risk. If you would invest  1,005  in Ayala on September 12, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Ayala  vs.  Steel Partners Holdings

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 fragile essential indicators, Ayala reported solid returns over the last few months and may actually be approaching a breakup point.

Steel Partners Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Partners Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ayala and Steel Partners

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

The idea behind Ayala and Steel Partners Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.