Correlation Between Rizal Commercial and First Philippine

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

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

Diversification Opportunities for Rizal Commercial and First Philippine

-0.6

Correlation Coefficient

Rizal Commercial  First Philippine

Excellent diversification

The 3 months correlation between Rizal and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking and First Philippine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Philippine Holdings and Rizal Commercial 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 Rizal Commercial Banking are associated (or correlated) with First Philippine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Philippine Holdings has no effect on the direction of Rizal Commercial i.e., Rizal Commercial and First Philippine go up and down completely randomly.

Pair Corralation between Rizal Commercial and First Philippine

Assuming the 90 days trading horizon Rizal Commercial is expected to generate 28.63 times less return on investment than First Philippine. But when comparing it to its historical volatility, Rizal Commercial Banking is 2.22 times less risky than First Philippine. It trades about 0.01 of its potential returns per unit of risk. First Philippine Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,617  in First Philippine Holdings on April 24, 2025 and sell it today you would earn a total of  2,183  from holding First Philippine Holdings or generate 38.86% return on investment over 90 days.

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

Rizal Commercial Banking  vs.  First Philippine Holdings

Rizal Commercial Banking

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking 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, Rizal Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 14 (%) 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.

Pair Trading with Rizal Commercial and First Philippine

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

The idea behind Rizal Commercial Banking and First Philippine 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.