Correlation Between Philippine National and Union Bank

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

Diversification Opportunities for Philippine National and Union Bank

0.73

Correlation Coefficient

Philippine National  Union Bank

Poor diversification

The 3 months correlation between Philippine and Union is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Philippine National i.e., Philippine National and Union Bank go up and down completely randomly.

Pair Corralation between Philippine National and Union Bank

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 0.62 times more return on investment than Union Bank. However, Philippine National Bank is 1.62 times less risky than Union Bank. It trades about 0.06 of its potential returns per unit of risk. Union Bank of is currently generating about -0.04 per unit of risk. If you would invest  1,886  in Philippine National Bank on September 5, 2024 and sell it today you would earn a total of  709.00  from holding Philippine National Bank or generate 37.59% return on investment over 90 days.

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

Philippine National Bank  vs.  Union Bank of

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 uncertain technical and fundamental indicators, Philippine National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Union Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Union Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Philippine National and Union Bank

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

The idea behind Philippine National Bank and Union Bank of 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.