Correlation Between THE PHILIPPINE and ATN Holdings

Can any of the company-specific risk be diversified away by investing in both THE PHILIPPINE and ATN Holdings 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 THE PHILIPPINE and ATN Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between THE PHILIPPINE STOCK and ATN Holdings, you can compare the effects of market volatilities on THE PHILIPPINE and ATN Holdings 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 THE PHILIPPINE with a short position of ATN Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of THE PHILIPPINE and ATN Holdings.

Diversification Opportunities for THE PHILIPPINE and ATN Holdings

-0.49

Correlation Coefficient

THE PHILIPPINE  ATN Holdings

Very good diversification

The 3 months correlation between THE and ATN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK and ATN Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATN Holdings and THE PHILIPPINE 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 THE PHILIPPINE STOCK are associated (or correlated) with ATN Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATN Holdings has no effect on the direction of THE PHILIPPINE i.e., THE PHILIPPINE and ATN Holdings go up and down completely randomly.

Pair Corralation between THE PHILIPPINE and ATN Holdings

Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the ATN Holdings. But the index apears to be less risky and, when comparing its historical volatility, THE PHILIPPINE STOCK is 1.27 times less risky than ATN Holdings. The index trades about -0.08 of its potential returns per unit of risk. The ATN Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  52.00  in ATN Holdings on December 29, 2024 and sell it today you would earn a total of  2.00  from holding ATN Holdings or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

THE PHILIPPINE STOCK  vs.  ATN Holdings

Pair Trading with THE PHILIPPINE and ATN Holdings

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

The idea behind THE PHILIPPINE STOCK and ATN Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.