Correlation Between Philippine Business and Security Bank

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

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

Diversification Opportunities for Philippine Business and Security Bank

0.0

Correlation Coefficient

Philippine Business  Security Bank

Pay attention - limited upside

The 3 months correlation between Philippine and Security is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Security Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Bank Corp and Philippine Business 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 Philippine Business Bank are associated (or correlated) with Security Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Bank Corp has no effect on the direction of Philippine Business i.e., Philippine Business and Security Bank go up and down completely randomly.

Pair Corralation between Philippine Business and Security Bank

Assuming the 90 days trading horizon Philippine Business is expected to generate 3.19 times less return on investment than Security Bank. But when comparing it to its historical volatility, Philippine Business Bank is 1.77 times less risky than Security Bank. It trades about 0.11 of its potential returns per unit of risk. Security Bank Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,225  in Security Bank Corp on September 3, 2024 and sell it today you would earn a total of  2,455  from holding Security Bank Corp or generate 39.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Philippine Business Bank  vs.  Security Bank Corp

Philippine Business Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Security Bank Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Security Bank Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Security Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philippine Business and Security Bank

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

The idea behind Philippine Business Bank and Security Bank 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.