Correlation Between Metro Pacific and ITOCHU

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

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

Diversification Opportunities for Metro Pacific and ITOCHU

-0.29

Correlation Coefficient

Metro Pacific  ITOCHU

Very good diversification

The 3 months correlation between Metro and ITOCHU is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Metro Pacific Investments and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU and Metro Pacific 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 Metro Pacific Investments are associated (or correlated) with ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Metro Pacific i.e., Metro Pacific and ITOCHU go up and down completely randomly.

Pair Corralation between Metro Pacific and ITOCHU

If you would invest  5,275  in ITOCHU on September 1, 2024 and sell it today you would lose (175.00) from holding ITOCHU or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Metro Pacific Investments  vs.  ITOCHU

Metro Pacific Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Pacific Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Metro Pacific is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ITOCHU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ITOCHU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Metro Pacific and ITOCHU

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

The idea behind Metro Pacific Investments and ITOCHU 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.