Correlation Between PLDT and Manila Electric

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

By analyzing existing cross correlation between PLDT Inc and Manila Electric Co, you can compare the effects of market volatilities on PLDT and Manila Electric 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 Manila Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLDT and Manila Electric.

Diversification Opportunities for PLDT and Manila Electric

-0.15

Correlation Coefficient

PLDT  Manila Electric

Good diversification

The 3 months correlation between PLDT and Manila is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc and Manila Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Electric 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 Manila Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Electric has no effect on the direction of PLDT i.e., PLDT and Manila Electric go up and down completely randomly.

Pair Corralation between PLDT and Manila Electric

Assuming the 90 days trading horizon PLDT Inc is expected to under-perform the Manila Electric. In addition to that, PLDT is 1.07 times more volatile than Manila Electric Co. It trades about -0.17 of its total potential returns per unit of risk. Manila Electric Co is currently generating about -0.18 per unit of volatility. If you would invest  48,600  in Manila Electric Co on September 23, 2024 and sell it today you would lose (3,400) from holding Manila Electric Co or give up 7.0% of portfolio value over 90 days.

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

PLDT Inc  vs.  Manila Electric Co

PLDT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLDT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Manila Electric

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manila Electric Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Manila Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PLDT and Manila Electric

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

The idea behind PLDT Inc and Manila Electric Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..