Correlation Between Philippine Business and Manila Electric
Can any of the company-specific risk be diversified away by investing in both Philippine Business and Manila Electric 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 Electric 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 Electric Co, you can compare the effects of market volatilities on Philippine Business and Manila Electric 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 Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Business and Manila Electric.
Diversification Opportunities for Philippine Business and Manila Electric
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Philippine and Manila is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Manila Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Electric 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 Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Electric has no effect on the direction of Philippine Business i.e., Philippine Business and Manila Electric go up and down completely randomly.
Pair Corralation between Philippine Business and Manila Electric
Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 0.34 times more return on investment than Manila Electric. However, Philippine Business Bank is 2.91 times less risky than Manila Electric. It trades about 0.14 of its potential returns per unit of risk. Manila Electric Co is currently generating about -0.02 per unit of risk. If you would invest 907.00 in Philippine Business Bank on September 3, 2024 and sell it today you would earn a total of 23.00 from holding Philippine Business Bank or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Philippine Business Bank vs. Manila Electric Co
Performance |
| Timeline |
| Philippine Business Bank |
| Manila Electric |
Philippine Business and Manila Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philippine Business and Manila Electric
The main advantage of trading using opposite Philippine Business and Manila Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philippine Business position performs unexpectedly, Manila Electric 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 Electric will offset losses from the drop in Manila Electric's long position.| Philippine Business vs. Semirara Mining Corp | Philippine Business vs. Century Pacific Food | Philippine Business vs. Philippine Savings Bank | Philippine Business vs. Lepanto Consolidated Mining |
| Manila Electric vs. Philippine Business Bank | Manila Electric vs. Premiere Entertainment | Manila Electric vs. COL Financial Group | Manila Electric vs. Union Bank of |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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