Correlation Between Postal Savings and Bank of the Philippine Is

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Can any of the company-specific risk be diversified away by investing in both Postal Savings and Bank of the Philippine Is 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 Postal Savings and Bank of the Philippine Is into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Postal Savings Bank and Bank of the, you can compare the effects of market volatilities on Postal Savings and Bank of the Philippine Is 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 Postal Savings with a short position of Bank of the Philippine Is. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postal Savings and Bank of the Philippine Is.

Diversification Opportunities for Postal Savings and Bank of the Philippine Is

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Postal and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Postal Savings Bank and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the Philippine Is and Postal 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 Postal Savings Bank are associated (or correlated) with Bank of the Philippine Is. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the Philippine Is has no effect on the direction of Postal Savings i.e., Postal Savings and Bank of the Philippine Is go up and down completely randomly.

Pair Corralation between Postal Savings and Bank of the Philippine Is

Assuming the 90 days horizon Postal Savings Bank is expected to generate 0.49 times more return on investment than Bank of the Philippine Is. However, Postal Savings Bank is 2.04 times less risky than Bank of the Philippine Is. It trades about 0.19 of its potential returns per unit of risk. Bank of the is currently generating about 0.03 per unit of risk. If you would invest  58.00  in Postal Savings Bank on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Postal Savings Bank or generate 13.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.39%
ValuesDaily Returns

Postal Savings Bank  vs.  Bank of the

 Performance 
       Timeline  
Postal Savings Bank 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Postal Savings reported solid returns over the last few months and may actually be approaching a breakup point.
Bank of the Philippine Is 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Bank of the Philippine Is is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Postal Savings and Bank of the Philippine Is Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Postal Savings and Bank of the Philippine Is

The main advantage of trading using opposite Postal Savings and Bank of the Philippine Is positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Savings position performs unexpectedly, Bank of the Philippine Is 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 Bank of the Philippine Is will offset losses from the drop in Bank of the Philippine Is' long position.
The idea behind Postal Savings Bank and Bank of the 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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