Correlation Between Century Pacific and DMCI Holdings

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

By analyzing existing cross correlation between Century Pacific Food and DMCI Holdings, you can compare the effects of market volatilities on Century Pacific and DMCI Holdings 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 Century Pacific with a short position of DMCI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Pacific and DMCI Holdings.

Diversification Opportunities for Century Pacific and DMCI Holdings

-0.32

Correlation Coefficient

Century Pacific  DMCI Holdings

Very good diversification

The 3 months correlation between Century and DMCI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Century Pacific Food and DMCI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings and Century Pacific 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 Century Pacific Food are associated (or correlated) with DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings has no effect on the direction of Century Pacific i.e., Century Pacific and DMCI Holdings go up and down completely randomly.

Pair Corralation between Century Pacific and DMCI Holdings

Assuming the 90 days trading horizon Century Pacific Food is expected to generate 1.71 times more return on investment than DMCI Holdings. However, Century Pacific is 1.71 times more volatile than DMCI Holdings. It trades about 0.08 of its potential returns per unit of risk. DMCI Holdings is currently generating about -0.11 per unit of risk. If you would invest  4,200  in Century Pacific Food on October 10, 2024 and sell it today you would earn a total of  125.00  from holding Century Pacific Food or generate 2.98% return on investment over 90 days.

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

Century Pacific Food  vs.  DMCI Holdings

Century Pacific Food

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Century Pacific Food are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Century Pacific unveiled solid returns over the last few months and may actually be approaching a breakup point.

DMCI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Century Pacific and DMCI Holdings

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

The idea behind Century Pacific Food and DMCI 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.