Correlation Between Philippine Business and Bank of the

Can any of the company-specific risk be diversified away by investing in both Philippine Business and Bank of the 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 Bank of the 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 Bank of the, you can compare the effects of market volatilities on Philippine Business and Bank of the 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 Bank of the. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Business and Bank of the.

Diversification Opportunities for Philippine Business and Bank of the

-0.5

Correlation Coefficient

Philippine Business  Bank of the

Very good diversification

The 3 months correlation between Philippine and Bank is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the 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 Bank of the. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the has no effect on the direction of Philippine Business i.e., Philippine Business and Bank of the go up and down completely randomly.

Pair Corralation between Philippine Business and Bank of the

Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 1.35 times more return on investment than Bank of the. However, Philippine Business is 1.35 times more volatile than Bank of the. It trades about 0.12 of its potential returns per unit of risk. Bank of the is currently generating about -0.03 per unit of risk. If you would invest  754.00  in Philippine Business Bank on April 23, 2025 and sell it today you would earn a total of  117.00  from holding Philippine Business Bank or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Philippine Business Bank  vs.  Bank of the

Philippine Business Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Philippine Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 rather sound technical and fundamental indicators, Bank of the is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Philippine Business and Bank of the

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

The idea behind Philippine Business Bank and Bank of the 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.