Correlation Between Crown Asia and Ayala Corp

Can any of the company-specific risk be diversified away by investing in both Crown Asia and Ayala Corp 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 Crown Asia and Ayala Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Asia Chemicals and Ayala Corp, you can compare the effects of market volatilities on Crown Asia and Ayala Corp 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 Crown Asia with a short position of Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Asia and Ayala Corp.

Diversification Opportunities for Crown Asia and Ayala Corp

0.47

Correlation Coefficient

Crown Asia  Ayala Corp

Very weak diversification

The 3 months correlation between Crown and Ayala is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and Ayala Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp and Crown Asia 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 Crown Asia Chemicals are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp has no effect on the direction of Crown Asia i.e., Crown Asia and Ayala Corp go up and down completely randomly.

Pair Corralation between Crown Asia and Ayala Corp

Assuming the 90 days trading horizon Crown Asia Chemicals is expected to generate 1.3 times more return on investment than Ayala Corp. However, Crown Asia is 1.3 times more volatile than Ayala Corp. It trades about 0.04 of its potential returns per unit of risk. Ayala Corp is currently generating about -0.05 per unit of risk. If you would invest  164.00  in Crown Asia Chemicals on December 30, 2024 and sell it today you would earn a total of  6.00  from holding Crown Asia Chemicals or generate 3.66% return on investment over 90 days.

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

Crown Asia Chemicals  vs.  Ayala Corp

Crown Asia Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Asia Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ayala Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Crown Asia and Ayala Corp

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

The idea behind Crown Asia Chemicals and Ayala 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.