Correlation Between Philippine Savings and GT Capital

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

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

Diversification Opportunities for Philippine Savings and GT Capital

-0.02

Correlation Coefficient

Philippine Savings  GT Capital

Good diversification

The 3 months correlation between Philippine and GTCAP is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings Bank and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings and Philippine Savings 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 Savings Bank are associated (or correlated) with GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Philippine Savings i.e., Philippine Savings and GT Capital go up and down completely randomly.

Pair Corralation between Philippine Savings and GT Capital

Assuming the 90 days trading horizon Philippine Savings is expected to generate 31.45 times less return on investment than GT Capital. But when comparing it to its historical volatility, Philippine Savings Bank is 2.15 times less risky than GT Capital. It trades about 0.01 of its potential returns per unit of risk. GT Capital Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  48,580  in GT Capital Holdings on April 24, 2025 and sell it today you would earn a total of  16,770  from holding GT Capital Holdings or generate 34.52% return on investment over 90 days.

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

Philippine Savings Bank  vs.  GT Capital Holdings

Philippine Savings Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Savings Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Philippine Savings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

GT Capital Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GT Capital Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, GT Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philippine Savings and GT Capital

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

The idea behind Philippine Savings Bank and GT Capital 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.