Correlation Between Jollibee Foods and IPM

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

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

Diversification Opportunities for Jollibee Foods and IPM

0.3

Correlation Coefficient

Jollibee Foods  IPM

Weak diversification

The 3 months correlation between Jollibee and IPM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp and IPM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPM and Jollibee Foods 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 Jollibee Foods Corp are associated (or correlated) with IPM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPM has no effect on the direction of Jollibee Foods i.e., Jollibee Foods and IPM go up and down completely randomly.

Pair Corralation between Jollibee Foods and IPM

Assuming the 90 days trading horizon Jollibee Foods Corp is expected to under-perform the IPM. But the stock apears to be less risky and, when comparing its historical volatility, Jollibee Foods Corp is 2.8 times less risky than IPM. The stock trades about -0.06 of its potential returns per unit of risk. The IPM is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  205.00  in IPM on October 26, 2024 and sell it today you would lose (23.00) from holding IPM or give up 11.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Jollibee Foods Corp  vs.  IPM

Jollibee Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

IPM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IPM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IPM is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Jollibee Foods and IPM

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

The idea behind Jollibee Foods Corp and IPM 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.