Correlation Between Philex Mining and Philippine Savings

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

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

Diversification Opportunities for Philex Mining and Philippine Savings

0.44

Correlation Coefficient

Philex Mining  Philippine Savings

Very weak diversification

The 3 months correlation between Philex and Philippine is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Philex Mining Corp and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings Bank and Philex Mining 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 Philex Mining Corp are associated (or correlated) with Philippine Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of Philex Mining i.e., Philex Mining and Philippine Savings go up and down completely randomly.

Pair Corralation between Philex Mining and Philippine Savings

Assuming the 90 days trading horizon Philex Mining is expected to generate 5.27 times less return on investment than Philippine Savings. In addition to that, Philex Mining is 1.27 times more volatile than Philippine Savings Bank. It trades about 0.02 of its total potential returns per unit of risk. Philippine Savings Bank is currently generating about 0.11 per unit of volatility. If you would invest  5,412  in Philippine Savings Bank on September 3, 2024 and sell it today you would earn a total of  588.00  from holding Philippine Savings Bank or generate 10.86% return on investment over 90 days.

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

Philex Mining Corp  vs.  Philippine Savings Bank

Philex Mining Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philex Mining Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Philex Mining is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Philippine Savings Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Savings Bank are ranked lower than 8 (%) 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.

Pair Trading with Philex Mining and Philippine Savings

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

The idea behind Philex Mining Corp and Philippine Savings Bank 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.