Correlation Between Philippine Savings and Wilcon Depot

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

Diversification Opportunities for Philippine Savings and Wilcon Depot

0.34

Correlation Coefficient

Philippine Savings  Wilcon Depot

Weak diversification

The 3 months correlation between Philippine and Wilcon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings Bank and Wilcon Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilcon Depot 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 Wilcon Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilcon Depot has no effect on the direction of Philippine Savings i.e., Philippine Savings and Wilcon Depot go up and down completely randomly.

Pair Corralation between Philippine Savings and Wilcon Depot

Assuming the 90 days trading horizon Philippine Savings Bank is expected to generate 0.44 times more return on investment than Wilcon Depot. However, Philippine Savings Bank is 2.28 times less risky than Wilcon Depot. It trades about -0.01 of its potential returns per unit of risk. Wilcon Depot is currently generating about -0.23 per unit of risk. If you would invest  5,737  in Philippine Savings Bank on November 27, 2024 and sell it today you would lose (57.00) from holding Philippine Savings Bank or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Philippine Savings Bank  vs.  Wilcon Depot

Philippine Savings Bank

Risk-Adjusted Performance

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.

Wilcon Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wilcon Depot has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Philippine Savings and Wilcon Depot

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

The idea behind Philippine Savings Bank and Wilcon Depot 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.