Correlation Between Philippine National and Lepanto Consolidated

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

Diversification Opportunities for Philippine National and Lepanto Consolidated

0.06

Correlation Coefficient

Philippine National  Lepanto Consolidated

Significant diversification

The 3 months correlation between Philippine and Lepanto is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated 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 Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Philippine National i.e., Philippine National and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Philippine National and Lepanto Consolidated

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 0.28 times more return on investment than Lepanto Consolidated. However, Philippine National Bank is 3.59 times less risky than Lepanto Consolidated. It trades about 0.08 of its potential returns per unit of risk. Lepanto Consolidated Mining is currently generating about -0.02 per unit of risk. If you would invest  1,970  in Philippine National Bank on October 12, 2024 and sell it today you would earn a total of  1,040  from holding Philippine National Bank or generate 52.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.33%
Values	Daily Returns

Philippine National Bank  vs.  Lepanto Consolidated Mining

Philippine National Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine National 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 National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepanto Consolidated Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Philippine National and Lepanto Consolidated

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

The idea behind Philippine National Bank and Lepanto Consolidated Mining 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.