Correlation Between National Health and Ayala Corp

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

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

Diversification Opportunities for National Health and Ayala Corp

-0.02

Correlation Coefficient

National Health  Ayala Corp

Good diversification

The 3 months correlation between National and Ayala is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Health Scan and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR and National Health 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 National Health Scan 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 ADR has no effect on the direction of National Health i.e., National Health and Ayala Corp go up and down completely randomly.

Pair Corralation between National Health and Ayala Corp

If you would invest  1.10  in National Health Scan on December 29, 2024 and sell it today you would lose (0.38) from holding National Health Scan or give up 34.55% of portfolio value over 90 days.

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

National Health Scan  vs.  Ayala Corp ADR

National Health Scan

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Scan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, National Health reported solid returns over the last few months and may actually be approaching a breakup point.

Ayala Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Ayala Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Health and Ayala Corp

The main advantage of trading using opposite National Health and Ayala Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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 National Health Scan and Ayala Corp ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.