Correlation Between STI Education and Rizal Commercial

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

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

Diversification Opportunities for STI Education and Rizal Commercial

-0.17

Correlation Coefficient

STI Education  Rizal Commercial

Good diversification

The 3 months correlation between STI and Rizal is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding STI Education Systems and Rizal Commercial Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rizal Commercial Banking and STI Education 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 STI Education Systems are associated (or correlated) with Rizal Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rizal Commercial Banking has no effect on the direction of STI Education i.e., STI Education and Rizal Commercial go up and down completely randomly.

Pair Corralation between STI Education and Rizal Commercial

Assuming the 90 days trading horizon STI Education Systems is expected to generate 0.79 times more return on investment than Rizal Commercial. However, STI Education Systems is 1.26 times less risky than Rizal Commercial. It trades about 0.1 of its potential returns per unit of risk. Rizal Commercial Banking is currently generating about -0.03 per unit of risk. If you would invest  119.00  in STI Education Systems on September 23, 2024 and sell it today you would earn a total of  10.00  from holding STI Education Systems or generate 8.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

STI Education Systems  vs.  Rizal Commercial Banking

STI Education Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rizal Commercial Banking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rizal Commercial Banking has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with STI Education and Rizal Commercial

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

The idea behind STI Education Systems and Rizal Commercial Banking 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.