Correlation Between Integrated Micro and Philippine Business

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

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

Diversification Opportunities for Integrated Micro and Philippine Business

-0.72

Correlation Coefficient

Integrated Micro  Philippine Business

Pay attention - limited upside

The 3 months correlation between Integrated and Philippine is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Micro Electronics 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 Integrated Micro 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 Integrated Micro Electronics 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 Integrated Micro i.e., Integrated Micro and Philippine Business go up and down completely randomly.

Pair Corralation between Integrated Micro and Philippine Business

Assuming the 90 days trading horizon Integrated Micro Electronics is expected to under-perform the Philippine Business. In addition to that, Integrated Micro is 1.64 times more volatile than Philippine Business Bank. It trades about -0.02 of its total potential returns per unit of risk. Philippine Business Bank is currently generating about 0.11 per unit of volatility. If you would invest  849.00  in Philippine Business Bank on August 31, 2024 and sell it today you would earn a total of  81.00  from holding Philippine Business Bank or generate 9.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Integrated Micro Electronics  vs.  Philippine Business Bank

Integrated Micro Ele

Risk-Adjusted Performance

0 of 100

Very Weak

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

Philippine Business Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine Business may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Integrated Micro and Philippine Business

The main advantage of trading using opposite Integrated Micro and Philippine Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integrated Micro 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 Integrated Micro Electronics 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.