Correlation Between First Philippine and Filinvest Land

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

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

Diversification Opportunities for First Philippine and Filinvest Land

-0.5

Correlation Coefficient

First Philippine  Filinvest Land

Very good diversification

The 3 months correlation between First and Filinvest is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and Filinvest Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filinvest Land and First Philippine 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 First Philippine Holdings are associated (or correlated) with Filinvest Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filinvest Land has no effect on the direction of First Philippine i.e., First Philippine and Filinvest Land go up and down completely randomly.

Pair Corralation between First Philippine and Filinvest Land

Assuming the 90 days trading horizon First Philippine Holdings is expected to under-perform the Filinvest Land. But the stock apears to be less risky and, when comparing its historical volatility, First Philippine Holdings is 5.44 times less risky than Filinvest Land. The stock trades about -0.03 of its potential returns per unit of risk. The Filinvest Land is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  63.00  in Filinvest Land on September 5, 2024 and sell it today you would earn a total of  11.00  from holding Filinvest Land or generate 17.46% return on investment over 90 days.

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

First Philippine Holdings  vs.  Filinvest Land

First Philippine Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Filinvest Land

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Filinvest Land are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Filinvest Land exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Philippine and Filinvest Land

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

The idea behind First Philippine Holdings and Filinvest Land 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.