Correlation Between PLDT and Lumen Technologies
Can any of the company-specific risk be diversified away by investing in both PLDT and Lumen Technologies 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 PLDT and Lumen Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLDT Inc ADR and Lumen Technologies, you can compare the effects of market volatilities on PLDT and Lumen Technologies 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 PLDT with a short position of Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLDT and Lumen Technologies.
Diversification Opportunities for PLDT and Lumen Technologies
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between PLDT and Lumen is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc ADR and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies and PLDT 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 PLDT Inc ADR are associated (or correlated) with Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of PLDT i.e., PLDT and Lumen Technologies go up and down completely randomly.
Pair Corralation between PLDT and Lumen Technologies
Considering the 90-day investment horizon PLDT Inc ADR is expected to under-perform the Lumen Technologies. But the stock apears to be less risky and, when comparing its historical volatility, PLDT Inc ADR is 3.74 times less risky than Lumen Technologies. The stock trades about -0.27 of its potential returns per unit of risk. The Lumen Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 644.00 in Lumen Technologies on August 26, 2024 and sell it today you would earn a total of 144.00 from holding Lumen Technologies or generate 22.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PLDT Inc ADR vs. Lumen Technologies
Performance |
| Timeline |
| PLDT Inc ADR |
| Lumen Technologies |
PLDT and Lumen Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PLDT and Lumen Technologies
The main advantage of trading using opposite PLDT and Lumen Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLDT position performs unexpectedly, Lumen Technologies 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 Lumen Technologies will offset losses from the drop in Lumen Technologies' long position.The idea behind PLDT Inc ADR and Lumen Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Lumen Technologies vs. Verizon Communications | Lumen Technologies vs. T Mobile | Lumen Technologies vs. Comcast Corp | Lumen Technologies vs. ATT Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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