Correlation Between GT Capital and Manila Electric

Can any of the company-specific risk be diversified away by investing in both GT Capital and Manila Electric 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 Manila Electric 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 Manila Electric Co, you can compare the effects of market volatilities on GT Capital and Manila Electric 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 Manila Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of GT Capital and Manila Electric.

Diversification Opportunities for GT Capital and Manila Electric

-0.07

Correlation Coefficient

GT Capital  Manila Electric

Good diversification

The 3 months correlation between GTCAP and Manila is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings and Manila Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Electric 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 Manila Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Electric has no effect on the direction of GT Capital i.e., GT Capital and Manila Electric go up and down completely randomly.

Pair Corralation between GT Capital and Manila Electric

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the Manila Electric. But the stock apears to be less risky and, when comparing its historical volatility, GT Capital Holdings is 1.26 times less risky than Manila Electric. The stock trades about -0.07 of its potential returns per unit of risk. The Manila Electric Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  47,500  in Manila Electric Co on October 5, 2024 and sell it today you would earn a total of  1,200  from holding Manila Electric Co or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

GT Capital Holdings  vs.  Manila Electric Co

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.

Manila Electric

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with GT Capital and Manila Electric

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

The idea behind GT Capital Holdings and Manila Electric Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..