Correlation Between First Philippine and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Philippine and Dow Jones 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 First Philippine and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Philippine Holdings and Dow Jones Industrial, you can compare the effects of market volatilities on First Philippine and Dow Jones 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 First Philippine with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Philippine and Dow Jones.
Diversification Opportunities for First Philippine and Dow Jones
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Dow is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and First Philippine 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 First Philippine Holdings are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of First Philippine i.e., First Philippine and Dow Jones go up and down completely randomly.
Pair Corralation between First Philippine and Dow Jones
Assuming the 90 days trading horizon First Philippine is expected to generate 23.64 times less return on investment than Dow Jones. But when comparing it to its historical volatility, First Philippine Holdings is 1.25 times less risky than Dow Jones. It trades about 0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 276,911 from holding Dow Jones Industrial or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Philippine Holdings vs. Dow Jones Industrial
Performance |
| Timeline |
First Philippine and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Philippine Holdings
Pair trading matchups for First Philippine
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Philippine and Dow Jones
The main advantage of trading using opposite First Philippine and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Philippine position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| First Philippine vs. COL Financial Group | First Philippine vs. Crown Asia Chemicals | First Philippine vs. Security Bank Corp | First Philippine vs. Manulife Financial Corp |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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