Correlation Between First Philippine and Omico Corp
Can any of the company-specific risk be diversified away by investing in both First Philippine and Omico 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 First Philippine and Omico Corp 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 Omico Corp, you can compare the effects of market volatilities on First Philippine and Omico 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 First Philippine with a short position of Omico Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Philippine and Omico Corp.
Diversification Opportunities for First Philippine and Omico Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Omico is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and Omico Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omico Corp 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 Omico Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omico Corp has no effect on the direction of First Philippine i.e., First Philippine and Omico Corp go up and down completely randomly.
Pair Corralation between First Philippine and Omico Corp
Assuming the 90 days trading horizon First Philippine is expected to generate 155.77 times less return on investment than Omico Corp. But when comparing it to its historical volatility, First Philippine Holdings is 15.1 times less risky than Omico Corp. It trades about 0.01 of its potential returns per unit of risk. Omico Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Omico Corp on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Omico Corp or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 50.0% |
| Values | Daily Returns |
First Philippine Holdings vs. Omico Corp
Performance |
| Timeline |
| First Philippine Holdings |
| Omico Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Philippine and Omico Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Philippine and Omico Corp
The main advantage of trading using opposite First Philippine and Omico Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Philippine position performs unexpectedly, Omico 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 Omico Corp will offset losses from the drop in Omico Corp's long position.| First Philippine vs. Philippine Savings Bank | First Philippine vs. Allhome Corp | First Philippine vs. LFM Properties Corp | First Philippine vs. Altus Property Ventures |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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