Correlation Between Concepcion Industrial and Philippine Business

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

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

Diversification Opportunities for Concepcion Industrial and Philippine Business

-0.37

Correlation Coefficient

Concepcion Industrial  Philippine Business

Very good diversification

The 3 months correlation between Concepcion and Philippine is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Concepcion Industrial Corp and Philippine Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Business Bank and Concepcion Industrial 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 Concepcion Industrial Corp are associated (or correlated) with Philippine Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Business Bank has no effect on the direction of Concepcion Industrial i.e., Concepcion Industrial and Philippine Business go up and down completely randomly.

Pair Corralation between Concepcion Industrial and Philippine Business

Assuming the 90 days trading horizon Concepcion Industrial Corp is expected to generate 0.59 times more return on investment than Philippine Business. However, Concepcion Industrial Corp is 1.71 times less risky than Philippine Business. It trades about 0.07 of its potential returns per unit of risk. Philippine Business Bank is currently generating about 0.0 per unit of risk. If you would invest  1,350  in Concepcion Industrial Corp on December 1, 2024 and sell it today you would earn a total of  62.00  from holding Concepcion Industrial Corp or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.34%
Values	Daily Returns

Concepcion Industrial Corp  vs.  Philippine Business Bank

Concepcion Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Concepcion Industrial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Concepcion Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Philippine Business Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Philippine Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Philippine Business is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Concepcion Industrial and Philippine Business

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

The idea behind Concepcion Industrial Corp and Philippine Business Bank 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.