Correlation Between First Philippine and AgriNurture

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

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

Diversification Opportunities for First Philippine and AgriNurture

-0.45

Correlation Coefficient

First Philippine  AgriNurture

Very good diversification

The 3 months correlation between First and AgriNurture is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and AgriNurture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgriNurture and First Philippine 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 First Philippine Holdings are associated (or correlated) with AgriNurture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgriNurture has no effect on the direction of First Philippine i.e., First Philippine and AgriNurture go up and down completely randomly.

Pair Corralation between First Philippine and AgriNurture

Assuming the 90 days trading horizon First Philippine Holdings is expected to generate 1.73 times more return on investment than AgriNurture. However, First Philippine is 1.73 times more volatile than AgriNurture. It trades about 0.18 of its potential returns per unit of risk. AgriNurture is currently generating about -0.07 per unit of risk. 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	Very Weak
Accuracy	87.1%
Values	Daily Returns

First Philippine Holdings  vs.  AgriNurture

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.

AgriNurture

Risk-Adjusted Performance

Very Weak

Over the last 90 days AgriNurture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Pair Trading with First Philippine and AgriNurture

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

The idea behind First Philippine Holdings and AgriNurture 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..