Correlation Between Philippine National and Concepcion Industrial

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

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

Diversification Opportunities for Philippine National and Concepcion Industrial

0.6

Correlation Coefficient

Philippine National  Concepcion Industrial

Poor diversification

The 3 months correlation between Philippine and Concepcion is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Concepcion Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concepcion Industrial and Philippine National 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 National Bank are associated (or correlated) with Concepcion Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concepcion Industrial has no effect on the direction of Philippine National i.e., Philippine National and Concepcion Industrial go up and down completely randomly.

Pair Corralation between Philippine National and Concepcion Industrial

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 0.76 times more return on investment than Concepcion Industrial. However, Philippine National Bank is 1.31 times less risky than Concepcion Industrial. It trades about 0.04 of its potential returns per unit of risk. Concepcion Industrial Corp is currently generating about -0.11 per unit of risk. If you would invest  2,665  in Philippine National Bank on September 26, 2024 and sell it today you would earn a total of  20.00  from holding Philippine National Bank or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Philippine National Bank  vs.  Concepcion Industrial Corp

Philippine National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Concepcion Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concepcion Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Philippine National and Concepcion Industrial

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

The idea behind Philippine National Bank and Concepcion Industrial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.