Correlation Between Rizal Commercial and EEI Corp

Can any of the company-specific risk be diversified away by investing in both Rizal Commercial and EEI Corp 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 Rizal Commercial and EEI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rizal Commercial Banking and EEI Corp, you can compare the effects of market volatilities on Rizal Commercial and EEI Corp 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 Rizal Commercial with a short position of EEI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rizal Commercial and EEI Corp.

Diversification Opportunities for Rizal Commercial and EEI Corp

0.08

Correlation Coefficient

Rizal Commercial  EEI Corp

Significant diversification

The 3 months correlation between Rizal and EEI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking and EEI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EEI Corp and Rizal Commercial 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 Rizal Commercial Banking are associated (or correlated) with EEI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EEI Corp has no effect on the direction of Rizal Commercial i.e., Rizal Commercial and EEI Corp go up and down completely randomly.

Pair Corralation between Rizal Commercial and EEI Corp

Assuming the 90 days trading horizon Rizal Commercial is expected to generate 1.8 times less return on investment than EEI Corp. But when comparing it to its historical volatility, Rizal Commercial Banking is 1.49 times less risky than EEI Corp. It trades about 0.03 of its potential returns per unit of risk. EEI Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  285.00  in EEI Corp on September 14, 2024 and sell it today you would earn a total of  75.00  from holding EEI Corp or generate 26.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.71%
Values	Daily Returns

Rizal Commercial Banking  vs.  EEI Corp

Rizal Commercial Banking

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rizal Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EEI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EEI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rizal Commercial and EEI Corp

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

The idea behind Rizal Commercial Banking and EEI 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..