Correlation Between Bank of the Philippine Is and BDO Unibank

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

By analyzing existing cross correlation between Bank of the and BDO Unibank ADR, you can compare the effects of market volatilities on Bank of the Philippine Is and BDO Unibank 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 Bank of the Philippine Is with a short position of BDO Unibank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the Philippine Is and BDO Unibank.

Diversification Opportunities for Bank of the Philippine Is and BDO Unibank

0.65

Correlation Coefficient

Bank of the Philippine Is  BDO Unibank

Poor diversification

The 3 months correlation between Bank and BDO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and BDO Unibank ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDO Unibank ADR and Bank of the Philippine Is 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 Bank of the are associated (or correlated) with BDO Unibank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDO Unibank ADR has no effect on the direction of Bank of the Philippine Is i.e., Bank of the Philippine Is and BDO Unibank go up and down completely randomly.

Pair Corralation between Bank of the Philippine Is and BDO Unibank

Assuming the 90 days horizon Bank of the Philippine Is is expected to generate 1.24 times less return on investment than BDO Unibank. But when comparing it to its historical volatility, Bank of the is 1.14 times less risky than BDO Unibank. It trades about 0.06 of its potential returns per unit of risk. BDO Unibank ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,565  in BDO Unibank ADR on December 28, 2024 and sell it today you would earn a total of  220.00  from holding BDO Unibank ADR or generate 8.58% return on investment over 90 days.

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

Bank of the  vs.  BDO Unibank ADR

Bank of the Philippine Is

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bank of the Philippine Is may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BDO Unibank ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BDO Unibank ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BDO Unibank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of the Philippine Is and BDO Unibank

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

The idea behind Bank of the and BDO Unibank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.