Correlation Between House Of and Philippine Business

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

By analyzing existing cross correlation between House of Investments and Philippine Business Bank, you can compare the effects of market volatilities on House Of and Philippine Business 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 House Of with a short position of Philippine Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of House Of and Philippine Business.

Diversification Opportunities for House Of and Philippine Business

0.26

Correlation Coefficient

House Of  Philippine Business

Modest diversification

The 3 months correlation between House and Philippine is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding House of Investments and Philippine Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Business Bank and House Of 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 House of Investments are associated (or correlated) with Philippine Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Business Bank has no effect on the direction of House Of i.e., House Of and Philippine Business go up and down completely randomly.

Pair Corralation between House Of and Philippine Business

Assuming the 90 days trading horizon House of Investments is expected to generate 1.3 times more return on investment than Philippine Business. However, House Of is 1.3 times more volatile than Philippine Business Bank. It trades about 0.02 of its potential returns per unit of risk. Philippine Business Bank is currently generating about -0.06 per unit of risk. If you would invest  342.00  in House of Investments on December 30, 2024 and sell it today you would earn a total of  3.00  from holding House of Investments or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	58.49%
Values	Daily Returns

House of Investments  vs.  Philippine Business Bank

House of Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in House of Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, House Of is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Philippine Business Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Philippine Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with House Of and Philippine Business

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

The idea behind House of Investments and Philippine Business Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.