Correlation Between Philippine Savings and Now Corp

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

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

Diversification Opportunities for Philippine Savings and Now Corp

-0.09

Correlation Coefficient

Philippine Savings  Now Corp

Good diversification

The 3 months correlation between Philippine and Now is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings Bank and Now Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Corp and Philippine Savings 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 Savings Bank are associated (or correlated) with Now Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Corp has no effect on the direction of Philippine Savings i.e., Philippine Savings and Now Corp go up and down completely randomly.

Pair Corralation between Philippine Savings and Now Corp

Assuming the 90 days trading horizon Philippine Savings Bank is expected to generate 0.67 times more return on investment than Now Corp. However, Philippine Savings Bank is 1.5 times less risky than Now Corp. It trades about 0.04 of its potential returns per unit of risk. Now Corp is currently generating about -0.08 per unit of risk. If you would invest  5,121  in Philippine Savings Bank on October 5, 2024 and sell it today you would earn a total of  774.00  from holding Philippine Savings Bank or generate 15.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.54%
Values	Daily Returns

Philippine Savings Bank  vs.  Now Corp

Philippine Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine Savings 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 Savings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Now Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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 Savings and Now Corp

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

The idea behind Philippine Savings Bank and Now 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.