Correlation Between Manila Electric and Cebu Landmasters
Can any of the company-specific risk be diversified away by investing in both Manila Electric and Cebu Landmasters 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 Manila Electric and Cebu Landmasters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manila Electric Co and Cebu Landmasters, you can compare the effects of market volatilities on Manila Electric and Cebu Landmasters 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 Manila Electric with a short position of Cebu Landmasters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manila Electric and Cebu Landmasters.
Diversification Opportunities for Manila Electric and Cebu Landmasters
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Manila and Cebu is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Manila Electric Co and Cebu Landmasters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Landmasters and Manila Electric 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 Manila Electric Co are associated (or correlated) with Cebu Landmasters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Landmasters has no effect on the direction of Manila Electric i.e., Manila Electric and Cebu Landmasters go up and down completely randomly.
Pair Corralation between Manila Electric and Cebu Landmasters
Assuming the 90 days trading horizon Manila Electric Co is expected to generate 1.48 times more return on investment than Cebu Landmasters. However, Manila Electric is 1.48 times more volatile than Cebu Landmasters. It trades about 0.11 of its potential returns per unit of risk. Cebu Landmasters is currently generating about 0.04 per unit of risk. If you would invest 41,500 in Manila Electric Co on September 2, 2024 and sell it today you would earn a total of 6,400 from holding Manila Electric Co or generate 15.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manila Electric Co vs. Cebu Landmasters
Performance |
| Timeline |
| Manila Electric |
| Cebu Landmasters |
Manila Electric and Cebu Landmasters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manila Electric and Cebu Landmasters
The main advantage of trading using opposite Manila Electric and Cebu Landmasters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manila Electric position performs unexpectedly, Cebu Landmasters 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 Cebu Landmasters will offset losses from the drop in Cebu Landmasters' long position.| Manila Electric vs. Aboitiz Equity Ventures | Manila Electric vs. Allhome Corp | Manila Electric vs. LFM Properties Corp | Manila Electric vs. Altus Property Ventures |
| Cebu Landmasters vs. Lepanto Consolidated Mining | Cebu Landmasters vs. Rizal Commercial Banking | Cebu Landmasters vs. Philex Mining Corp | Cebu Landmasters vs. Globe Telecom |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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