Correlation Between Philippine Business and Manila Mining
Can any of the company-specific risk be diversified away by investing in both Philippine Business and Manila Mining 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 Manila Mining 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 Manila Mining Corp, you can compare the effects of market volatilities on Philippine Business and Manila Mining 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 Manila Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Business and Manila Mining.
Diversification Opportunities for Philippine Business and Manila Mining
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philippine and Manila is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Manila Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Mining Corp 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 Manila Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Mining Corp has no effect on the direction of Philippine Business i.e., Philippine Business and Manila Mining go up and down completely randomly.
Pair Corralation between Philippine Business and Manila Mining
Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 0.49 times more return on investment than Manila Mining. However, Philippine Business Bank is 2.05 times less risky than Manila Mining. It trades about 0.06 of its potential returns per unit of risk. Manila Mining Corp is currently generating about -0.66 per unit of risk. If you would invest 920.00 in Philippine Business Bank on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Philippine Business Bank or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 52.38% |
| Values | Daily Returns |
Philippine Business Bank vs. Manila Mining Corp
Performance |
| Timeline |
| Philippine Business Bank |
| Manila Mining Corp |
Philippine Business and Manila Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philippine Business and Manila Mining
The main advantage of trading using opposite Philippine Business and Manila Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philippine Business position performs unexpectedly, Manila Mining 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 Mining will offset losses from the drop in Manila Mining's long position.| Philippine Business vs. Metropolitan Bank Trust | Philippine Business vs. Philippine National Bank | Philippine Business vs. Asia United Bank | Philippine Business vs. Philippine Savings Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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