Correlation Between Philippine National and Filinvest REIT

Can any of the company-specific risk be diversified away by investing in both Philippine National and Filinvest REIT 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 Filinvest REIT 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 Filinvest REIT Corp, you can compare the effects of market volatilities on Philippine National and Filinvest REIT 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 Filinvest REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine National and Filinvest REIT.

Diversification Opportunities for Philippine National and Filinvest REIT

0.15

Correlation Coefficient

Philippine National  Filinvest REIT

Average diversification

The 3 months correlation between Philippine and Filinvest is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Filinvest REIT Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filinvest REIT Corp 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 Filinvest REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filinvest REIT Corp has no effect on the direction of Philippine National i.e., Philippine National and Filinvest REIT go up and down completely randomly.

Pair Corralation between Philippine National and Filinvest REIT

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 1.42 times more return on investment than Filinvest REIT. However, Philippine National is 1.42 times more volatile than Filinvest REIT Corp. It trades about 0.09 of its potential returns per unit of risk. Filinvest REIT Corp is currently generating about 0.04 per unit of risk. If you would invest  2,065  in Philippine National Bank on September 24, 2024 and sell it today you would earn a total of  575.00  from holding Philippine National Bank or generate 27.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Philippine National Bank  vs.  Filinvest REIT 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Filinvest REIT Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Filinvest REIT Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Filinvest REIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Philippine National and Filinvest REIT

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

The idea behind Philippine National Bank and Filinvest REIT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..