Correlation Between Philippine Savings and Semirara Mining

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

Diversification Opportunities for Philippine Savings and Semirara Mining

0.51

Correlation Coefficient

Philippine Savings  Semirara Mining

Very weak diversification

The 3 months correlation between Philippine and Semirara is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings 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 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 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 Savings i.e., Philippine Savings and Semirara Mining go up and down completely randomly.

Pair Corralation between Philippine Savings and Semirara Mining

Assuming the 90 days trading horizon Philippine Savings Bank is expected to generate 1.58 times more return on investment than Semirara Mining. However, Philippine Savings is 1.58 times more volatile than Semirara Mining Corp. It trades about 0.07 of its potential returns per unit of risk. Semirara Mining Corp is currently generating about 0.11 per unit of risk. If you would invest  5,560  in Philippine Savings Bank on September 7, 2024 and sell it today you would earn a total of  420.00  from holding Philippine Savings Bank or generate 7.55% return on investment over 90 days.

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

Philippine Savings Bank  vs.  Semirara Mining Corp

Philippine Savings Bank

Risk-Adjusted Performance

5 of 100

Insignificant

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

Semirara Mining Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Semirara Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Semirara Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Philippine Savings and Semirara Mining

The main advantage of trading using opposite Philippine Savings and Semirara Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philippine Savings 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 Savings 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.