Correlation Between Concepcion Industrial and Philippine Seven

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

Diversification Opportunities for Concepcion Industrial and Philippine Seven

0.65

Correlation Coefficient

Concepcion Industrial  Philippine Seven

Poor diversification

The 3 months correlation between Concepcion and Philippine is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Concepcion Industrial Corp 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 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 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 Concepcion Industrial i.e., Concepcion Industrial and Philippine Seven go up and down completely randomly.

Pair Corralation between Concepcion Industrial and Philippine Seven

Assuming the 90 days trading horizon Concepcion Industrial is expected to generate 11.18 times less return on investment than Philippine Seven. But when comparing it to its historical volatility, Concepcion Industrial Corp is 1.92 times less risky than Philippine Seven. It trades about 0.01 of its potential returns per unit of risk. Philippine Seven Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,602  in Philippine Seven Corp on October 11, 2024 and sell it today you would earn a total of  3,198  from holding Philippine Seven Corp or generate 88.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.31%
Values	Daily Returns

Concepcion Industrial Corp  vs.  Philippine Seven Corp

Concepcion Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concepcion Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Seven Corp

Risk-Adjusted Performance

0 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Concepcion Industrial and Philippine Seven

The main advantage of trading using opposite Concepcion Industrial and Philippine Seven positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Concepcion Industrial 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 Concepcion Industrial Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.