Correlation Between Philippine Business and RL Commercial

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

Diversification Opportunities for Philippine Business and RL Commercial

0.73

Correlation Coefficient

Philippine Business  RL Commercial

Poor diversification

The 3 months correlation between Philippine and RCR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and RL Commercial REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RL Commercial REIT 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 RL Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RL Commercial REIT has no effect on the direction of Philippine Business i.e., Philippine Business and RL Commercial go up and down completely randomly.

Pair Corralation between Philippine Business and RL Commercial

Assuming the 90 days trading horizon Philippine Business is expected to generate 1.41 times less return on investment than RL Commercial. In addition to that, Philippine Business is 2.5 times more volatile than RL Commercial REIT. It trades about 0.09 of its total potential returns per unit of risk. RL Commercial REIT is currently generating about 0.33 per unit of volatility. If you would invest  640.00  in RL Commercial REIT on April 22, 2025 and sell it today you would earn a total of  140.00  from holding RL Commercial REIT or generate 21.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.16%
Values	Daily Returns

Philippine Business Bank  vs.  RL Commercial REIT

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 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

RL Commercial REIT

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RL Commercial REIT are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, RL Commercial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philippine Business and RL Commercial

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

The idea behind Philippine Business Bank and RL Commercial REIT 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.