Correlation Between Liberty Flour and PLDT

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

By analyzing existing cross correlation between Liberty Flour Mills and PLDT Inc, you can compare the effects of market volatilities on Liberty Flour and PLDT 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 Liberty Flour with a short position of PLDT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Flour and PLDT.

Diversification Opportunities for Liberty Flour and PLDT

-0.67

Correlation Coefficient

Liberty Flour  PLDT

Excellent diversification

The 3 months correlation between Liberty and PLDT is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Flour Mills and PLDT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLDT Inc and Liberty Flour 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 Liberty Flour Mills are associated (or correlated) with PLDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLDT Inc has no effect on the direction of Liberty Flour i.e., Liberty Flour and PLDT go up and down completely randomly.

Pair Corralation between Liberty Flour and PLDT

Assuming the 90 days trading horizon Liberty Flour Mills is expected to generate 4.6 times more return on investment than PLDT. However, Liberty Flour is 4.6 times more volatile than PLDT Inc. It trades about 0.06 of its potential returns per unit of risk. PLDT Inc is currently generating about 0.03 per unit of risk. If you would invest  1,472  in Liberty Flour Mills on October 5, 2024 and sell it today you would earn a total of  350.00  from holding Liberty Flour Mills or generate 23.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	50.19%
Values	Daily Returns

Liberty Flour Mills  vs.  PLDT Inc

Liberty Flour Mills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Flour Mills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Liberty Flour exhibited solid returns over the last few months and may actually be approaching a breakup point.

PLDT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLDT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Liberty Flour and PLDT

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

The idea behind Liberty Flour Mills and PLDT Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.