Correlation Between Philippine Business and Crown Asia
Can any of the company-specific risk be diversified away by investing in both Philippine Business and Crown Asia 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 Philippine Business and Crown Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Philippine Business Bank and Crown Asia Chemicals, you can compare the effects of market volatilities on Philippine Business and Crown Asia 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 Philippine Business with a short position of Crown Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Business and Crown Asia.
Diversification Opportunities for Philippine Business and Crown Asia
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Philippine and Crown is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Crown Asia Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Asia Chemicals and Philippine Business 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 Philippine Business Bank are associated (or correlated) with Crown Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Asia Chemicals has no effect on the direction of Philippine Business i.e., Philippine Business and Crown Asia go up and down completely randomly.
Pair Corralation between Philippine Business and Crown Asia
Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 1.25 times more return on investment than Crown Asia. However, Philippine Business is 1.25 times more volatile than Crown Asia Chemicals. It trades about 0.06 of its potential returns per unit of risk. Crown Asia Chemicals is currently generating about 0.04 per unit of risk. If you would invest 672.00 in Philippine Business Bank on August 29, 2024 and sell it today you would earn a total of 258.00 from holding Philippine Business Bank or generate 38.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.26% |
| Values | Daily Returns |
Philippine Business Bank vs. Crown Asia Chemicals
Performance |
| Timeline |
| Philippine Business Bank |
| Crown Asia Chemicals |
Philippine Business and Crown Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philippine Business and Crown Asia
The main advantage of trading using opposite Philippine Business and Crown Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philippine Business position performs unexpectedly, Crown Asia 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 Crown Asia will offset losses from the drop in Crown Asia's long position.| Philippine Business vs. Apex Mining Co | Philippine Business vs. Pacificonline Systems | Philippine Business vs. SM Investments Corp | Philippine Business vs. Manila Mining Corp |
| Crown Asia vs. Philippine Savings Bank | Crown Asia vs. Jollibee Foods Corp | Crown Asia vs. Prime Media Holdings | Crown Asia vs. Pacificonline Systems |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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