Correlation Between THE PHILIPPINE and Fondo Mutuo

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

By analyzing existing cross correlation between THE PHILIPPINE STOCK and Fondo Mutuo ETF, you can compare the effects of market volatilities on THE PHILIPPINE and Fondo Mutuo 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 THE PHILIPPINE with a short position of Fondo Mutuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of THE PHILIPPINE and Fondo Mutuo.

Diversification Opportunities for THE PHILIPPINE and Fondo Mutuo

0.24

Correlation Coefficient

THE PHILIPPINE  Fondo Mutuo

Modest diversification

The 3 months correlation between THE and Fondo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK and Fondo Mutuo ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondo Mutuo ETF and THE 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 THE PHILIPPINE STOCK are associated (or correlated) with Fondo Mutuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondo Mutuo ETF has no effect on the direction of THE PHILIPPINE i.e., THE PHILIPPINE and Fondo Mutuo go up and down completely randomly.

Pair Corralation between THE PHILIPPINE and Fondo Mutuo

Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the Fondo Mutuo. In addition to that, THE PHILIPPINE is 1.07 times more volatile than Fondo Mutuo ETF. It trades about -0.17 of its total potential returns per unit of risk. Fondo Mutuo ETF is currently generating about -0.1 per unit of volatility. If you would invest  146,101  in Fondo Mutuo ETF on February 2, 2024 and sell it today you would lose (3,381) from holding Fondo Mutuo ETF or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

THE PHILIPPINE STOCK  vs.  Fondo Mutuo ETF

Pair Trading with THE PHILIPPINE and Fondo Mutuo

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

The idea behind THE PHILIPPINE STOCK and Fondo Mutuo ETF 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.