Correlation Between East West and Philippine Business
Can any of the company-specific risk be diversified away by investing in both East West 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 East West and Philippine Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Banking and Philippine Business Bank, you can compare the effects of market volatilities on East West 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 East West with a short position of Philippine Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Philippine Business.
Diversification Opportunities for East West and Philippine Business
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and Philippine is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking 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 East West 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 East West Banking 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 East West i.e., East West and Philippine Business go up and down completely randomly.
Pair Corralation between East West and Philippine Business
Assuming the 90 days trading horizon East West Banking is expected to generate 0.43 times more return on investment than Philippine Business. However, East West Banking is 2.32 times less risky than Philippine Business. It trades about 0.24 of its potential returns per unit of risk. Philippine Business Bank is currently generating about 0.03 per unit of risk. If you would invest 980.00 in East West Banking on December 2, 2024 and sell it today you would earn a total of 72.00 from holding East West Banking or generate 7.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 81.82% |
Values | Daily Returns |
East West Banking vs. Philippine Business Bank
Performance |
Timeline |
East West Banking |
Philippine Business Bank |
East West and Philippine Business Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with East West and Philippine Business
The main advantage of trading using opposite East West and Philippine Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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.East West vs. Crown Asia Chemicals | East West vs. Swift Foods | East West vs. Atlas Consolidated Mining | East West vs. COL Financial Group |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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