Correlation Between Keppel and Ayala Corp

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

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

Diversification Opportunities for Keppel and Ayala Corp

-0.43

Correlation Coefficient

Keppel  Ayala Corp

Very good diversification

The 3 months correlation between Keppel and Ayala is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Keppel Limited and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR and Keppel 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 Keppel Limited are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp ADR has no effect on the direction of Keppel i.e., Keppel and Ayala Corp go up and down completely randomly.

Pair Corralation between Keppel and Ayala Corp

Assuming the 90 days horizon Keppel is expected to generate 1.78 times less return on investment than Ayala Corp. But when comparing it to its historical volatility, Keppel Limited is 1.98 times less risky than Ayala Corp. It trades about 0.02 of its potential returns per unit of risk. Ayala Corp ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Ayala Corp ADR on October 9, 2024 and sell it today you would lose (25.00) from holding Ayala Corp ADR or give up 2.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Keppel Limited  vs.  Ayala Corp ADR

Keppel Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Keppel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ayala Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ayala Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Keppel and Ayala Corp

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

The idea behind Keppel Limited and Ayala Corp ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.