Correlation Between Manila Mining and Ayala Corp

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

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

Diversification Opportunities for Manila Mining and Ayala Corp

0.31

Correlation Coefficient

Manila Mining  Ayala Corp

Weak diversification

The 3 months correlation between Manila and Ayala is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Manila Mining Corp and Ayala Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp and Manila Mining 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 Manila Mining Corp 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 has no effect on the direction of Manila Mining i.e., Manila Mining and Ayala Corp go up and down completely randomly.

Pair Corralation between Manila Mining and Ayala Corp

Assuming the 90 days trading horizon Manila Mining Corp is expected to generate 4.62 times more return on investment than Ayala Corp. However, Manila Mining is 4.62 times more volatile than Ayala Corp. It trades about 0.37 of its potential returns per unit of risk. Ayala Corp is currently generating about -0.05 per unit of risk. If you would invest  0.27  in Manila Mining Corp on December 29, 2024 and sell it today you would earn a total of  0.49  from holding Manila Mining Corp or generate 181.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.9%
Values	Daily Returns

Manila Mining Corp  vs.  Ayala Corp

Manila Mining Corp

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Manila Mining Corp are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Manila Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ayala Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Manila Mining and Ayala Corp

The main advantage of trading using opposite Manila Mining and Ayala Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manila Mining 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 Manila Mining Corp and Ayala Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.