Correlation Between Bank of the and Philippine Seven

Can any of the company-specific risk be diversified away by investing in both Bank of the and Philippine Seven 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 and Philippine Seven 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 Philippine Seven Corp, you can compare the effects of market volatilities on Bank of the and Philippine Seven 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 with a short position of Philippine Seven. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the and Philippine Seven.

Diversification Opportunities for Bank of the and Philippine Seven

-0.62

Correlation Coefficient

Bank of the  Philippine Seven

Excellent diversification

The 3 months correlation between Bank and Philippine is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and Philippine Seven Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Seven Corp and Bank of the 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 Philippine Seven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Seven Corp has no effect on the direction of Bank of the i.e., Bank of the and Philippine Seven go up and down completely randomly.

Pair Corralation between Bank of the and Philippine Seven

Assuming the 90 days trading horizon Bank of the is expected to generate 0.77 times more return on investment than Philippine Seven. However, Bank of the is 1.3 times less risky than Philippine Seven. It trades about 0.09 of its potential returns per unit of risk. Philippine Seven Corp is currently generating about -0.03 per unit of risk. If you would invest  12,260  in Bank of the on December 23, 2024 and sell it today you would earn a total of  1,190  from holding Bank of the or generate 9.71% return on investment over 90 days.

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

Bank of the  vs.  Philippine Seven Corp

Bank of the

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bank of the may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Philippine Seven Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Philippine Seven Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Philippine Seven is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of the and Philippine Seven

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

The idea behind Bank of the and Philippine Seven Corp 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 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..