Correlation Between Security Bank and Jollibee Foods

Can any of the company-specific risk be diversified away by investing in both Security Bank and Jollibee Foods 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 Security Bank and Jollibee Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Security Bank and Jollibee Foods

0.73

Correlation Coefficient

Security Bank  Jollibee Foods

Poor diversification

The 3 months correlation between Security and Jollibee is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Security Bank Corp and Jollibee Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods Corp and Security Bank 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 Security Bank Corp are associated (or correlated) with Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods Corp has no effect on the direction of Security Bank i.e., Security Bank and Jollibee Foods go up and down completely randomly.

Pair Corralation between Security Bank and Jollibee Foods

Assuming the 90 days trading horizon Security Bank Corp is expected to generate 1.66 times more return on investment than Jollibee Foods. However, Security Bank is 1.66 times more volatile than Jollibee Foods Corp. It trades about 0.18 of its potential returns per unit of risk. Jollibee Foods Corp is currently generating about 0.05 per unit of risk. If you would invest  6,480  in Security Bank Corp on September 4, 2024 and sell it today you would earn a total of  2,200  from holding Security Bank Corp or generate 33.95% return on investment over 90 days.

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

Security Bank Corp  vs.  Jollibee Foods Corp

Security Bank Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Security Bank Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Security Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Jollibee Foods Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Jollibee Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Security Bank and Jollibee Foods

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

The idea behind Security Bank Corp and Jollibee Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.