Correlation Between First Philippine and Top Frontier

Can any of the company-specific risk be diversified away by investing in both First Philippine and Top Frontier 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 Top Frontier 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 Top Frontier Investment, you can compare the effects of market volatilities on First Philippine and Top Frontier 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 Top Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Philippine and Top Frontier.

Diversification Opportunities for First Philippine and Top Frontier

0.19

Correlation Coefficient

First Philippine  Top Frontier

Average diversification

The 3 months correlation between First and Top is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and Top Frontier Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Frontier Investment 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 Top Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Frontier Investment has no effect on the direction of First Philippine i.e., First Philippine and Top Frontier go up and down completely randomly.

Pair Corralation between First Philippine and Top Frontier

Assuming the 90 days trading horizon First Philippine Holdings is expected to generate 0.21 times more return on investment than Top Frontier. However, First Philippine Holdings is 4.68 times less risky than Top Frontier. It trades about 0.01 of its potential returns per unit of risk. Top Frontier Investment is currently generating about 0.0 per unit of risk. If you would invest  5,679  in First Philippine Holdings on September 14, 2024 and sell it today you would earn a total of  201.00  from holding First Philippine Holdings or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.77%
Values	Daily Returns

First Philippine Holdings  vs.  Top Frontier Investment

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Top Frontier Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Top Frontier Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Top Frontier may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Philippine and Top Frontier

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

The idea behind First Philippine Holdings and Top Frontier Investment 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.