Correlation Between GT Capital and Ayala Land

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

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

Diversification Opportunities for GT Capital and Ayala Land

0.88

Correlation Coefficient

GT Capital  Ayala Land

Very poor diversification

The 3 months correlation between GTCAP and Ayala is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings and Ayala Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Land and GT Capital 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 GT Capital Holdings are associated (or correlated) with Ayala Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Land has no effect on the direction of GT Capital i.e., GT Capital and Ayala Land go up and down completely randomly.

Pair Corralation between GT Capital and Ayala Land

Assuming the 90 days trading horizon GT Capital Holdings is expected to generate 0.85 times more return on investment than Ayala Land. However, GT Capital Holdings is 1.18 times less risky than Ayala Land. It trades about -0.08 of its potential returns per unit of risk. Ayala Land is currently generating about -0.17 per unit of risk. If you would invest  70,000  in GT Capital Holdings on September 13, 2024 and sell it today you would lose (6,600) from holding GT Capital Holdings or give up 9.43% of portfolio value over 90 days.

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

GT Capital Holdings  vs.  Ayala Land

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Ayala Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ayala Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GT Capital and Ayala Land

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

The idea behind GT Capital Holdings and Ayala 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.