Correlation Between Rizal Commercial and LT

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

Diversification Opportunities for Rizal Commercial and LT

0.27

Correlation Coefficient

Rizal Commercial  LT

Modest diversification

The 3 months correlation between Rizal and LT is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking and LT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LT Group 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 LT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LT Group has no effect on the direction of Rizal Commercial i.e., Rizal Commercial and LT go up and down completely randomly.

Pair Corralation between Rizal Commercial and LT

Assuming the 90 days trading horizon Rizal Commercial is expected to generate 1.96 times less return on investment than LT. In addition to that, Rizal Commercial is 2.2 times more volatile than LT Group. It trades about 0.05 of its total potential returns per unit of risk. LT Group is currently generating about 0.21 per unit of volatility. If you would invest  1,012  in LT Group on December 2, 2024 and sell it today you would earn a total of  150.00  from holding LT Group or generate 14.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Rizal Commercial Banking  vs.  LT Group

Rizal Commercial Banking

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking are ranked lower than 3 (%) 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.

LT Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LT Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, LT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rizal Commercial and LT

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

The idea behind Rizal Commercial Banking and LT Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.