Correlation Between Bank of the and First Philippine

Can any of the company-specific risk be diversified away by investing in both Bank of the and First Philippine 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 Bank of the and First Philippine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of the and First Philippine Holdings, you can compare the effects of market volatilities on Bank of the and First Philippine 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 Bank of the with a short position of First Philippine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the and First Philippine.

Diversification Opportunities for Bank of the and First Philippine

-0.33

Correlation Coefficient

Bank of the  First Philippine

Very good diversification

The 3 months correlation between Bank and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and First Philippine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Philippine Holdings and Bank of the 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 Bank of the are associated (or correlated) with First Philippine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Philippine Holdings has no effect on the direction of Bank of the i.e., Bank of the and First Philippine go up and down completely randomly.

Pair Corralation between Bank of the and First Philippine

Assuming the 90 days trading horizon Bank of the is expected to under-perform the First Philippine. But the stock apears to be less risky and, when comparing its historical volatility, Bank of the is 1.85 times less risky than First Philippine. The stock trades about -0.07 of its potential returns per unit of risk. The First Philippine Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,598  in First Philippine Holdings on April 21, 2025 and sell it today you would earn a total of  2,202  from holding First Philippine Holdings or generate 39.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bank of the  vs.  First Philippine Holdings

Bank of the

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

First Philippine Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Philippine Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, First Philippine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of the and First Philippine

The main advantage of trading using opposite Bank of the and First Philippine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the position performs unexpectedly, First Philippine 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 First Philippine will offset losses from the drop in First Philippine's long position.

The idea behind Bank of the and First Philippine Holdings 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.