Correlation Between Philippine National and Semirara Mining

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

Diversification Opportunities for Philippine National and Semirara Mining

0.25

Correlation Coefficient

Philippine National  Semirara Mining

Modest diversification

The 3 months correlation between Philippine and Semirara is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Semirara Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semirara Mining 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 Semirara Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semirara Mining Corp has no effect on the direction of Philippine National i.e., Philippine National and Semirara Mining go up and down completely randomly.

Pair Corralation between Philippine National and Semirara Mining

Assuming the 90 days trading horizon Philippine National is expected to generate 1.16 times less return on investment than Semirara Mining. In addition to that, Philippine National is 1.25 times more volatile than Semirara Mining Corp. It trades about 0.1 of its total potential returns per unit of risk. Semirara Mining Corp is currently generating about 0.14 per unit of volatility. If you would invest  3,171  in Semirara Mining Corp on October 12, 2024 and sell it today you would earn a total of  304.00  from holding Semirara Mining Corp or generate 9.59% return on investment over 90 days.

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

Philippine National Bank  vs.  Semirara Mining Corp

Philippine National Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine National Bank are ranked lower than 7 (%) 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.

Semirara Mining Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semirara Mining Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Semirara Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Philippine National and Semirara Mining

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

The idea behind Philippine National Bank and Semirara Mining 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.