Correlation Between PLDT and Ayala Corp
Can any of the company-specific risk be diversified away by investing in both PLDT and Ayala 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 PLDT and Ayala Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLDT Inc and Ayala Corp, you can compare the effects of market volatilities on PLDT and Ayala 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 PLDT with a short position of Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLDT and Ayala Corp.
Diversification Opportunities for PLDT and Ayala Corp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PLDT and Ayala is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc and Ayala Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp and PLDT 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 PLDT Inc are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp has no effect on the direction of PLDT i.e., PLDT and Ayala Corp go up and down completely randomly.
Pair Corralation between PLDT and Ayala Corp
Assuming the 90 days trading horizon PLDT Inc is expected to generate 0.93 times more return on investment than Ayala Corp. However, PLDT Inc is 1.07 times less risky than Ayala Corp. It trades about -0.17 of its potential returns per unit of risk. Ayala Corp is currently generating about -0.17 per unit of risk. If you would invest 135,000 in PLDT Inc on September 23, 2024 and sell it today you would lose (9,800) from holding PLDT Inc or give up 7.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
PLDT Inc vs. Ayala Corp
Performance |
Timeline |
PLDT Inc |
Ayala Corp |
PLDT and Ayala Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PLDT and Ayala Corp
The main advantage of trading using opposite PLDT and Ayala Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLDT position performs unexpectedly, Ayala 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 Ayala Corp will offset losses from the drop in Ayala Corp's long position.The idea behind PLDT Inc and Ayala 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.Check out your portfolio center.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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