Correlation Between Rizal Commercial and GT Capital

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

Diversification Opportunities for Rizal Commercial and GT Capital

-0.62

Correlation Coefficient

Rizal Commercial  GT Capital

Excellent diversification

The 3 months correlation between Rizal and GTCAP is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Rizal Commercial i.e., Rizal Commercial and GT Capital go up and down completely randomly.

Pair Corralation between Rizal Commercial and GT Capital

Assuming the 90 days trading horizon Rizal Commercial Banking is expected to generate 0.86 times more return on investment than GT Capital. However, Rizal Commercial Banking is 1.17 times less risky than GT Capital. It trades about 0.08 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.19 per unit of risk. If you would invest  2,480  in Rizal Commercial Banking on December 28, 2024 and sell it today you would earn a total of  220.00  from holding Rizal Commercial Banking or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Rizal Commercial Banking  vs.  GT Capital Holdings

Rizal Commercial Banking

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Rizal Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GT Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT Capital Holdings 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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Rizal Commercial and GT Capital

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

The idea behind Rizal Commercial Banking and GT Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.