Correlation Between Aboitiz Equity and Lepanto Consolidated

Can any of the company-specific risk be diversified away by investing in both Aboitiz Equity and Lepanto Consolidated 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 Aboitiz Equity and Lepanto Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aboitiz Equity Ventures and Lepanto Consolidated Mining, you can compare the effects of market volatilities on Aboitiz Equity and Lepanto Consolidated 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 Aboitiz Equity with a short position of Lepanto Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aboitiz Equity and Lepanto Consolidated.

Diversification Opportunities for Aboitiz Equity and Lepanto Consolidated

0.25

Correlation Coefficient

Aboitiz Equity  Lepanto Consolidated

Modest diversification

The 3 months correlation between Aboitiz and Lepanto is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aboitiz Equity Ventures and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated and Aboitiz Equity 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 Aboitiz Equity Ventures are associated (or correlated) with Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Aboitiz Equity i.e., Aboitiz Equity and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Aboitiz Equity and Lepanto Consolidated

Assuming the 90 days trading horizon Aboitiz Equity Ventures is expected to under-perform the Lepanto Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Aboitiz Equity Ventures is 2.7 times less risky than Lepanto Consolidated. The stock trades about -0.11 of its potential returns per unit of risk. The Lepanto Consolidated Mining is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6.90  in Lepanto Consolidated Mining on September 26, 2024 and sell it today you would lose (0.30) from holding Lepanto Consolidated Mining or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aboitiz Equity Ventures  vs.  Lepanto Consolidated Mining

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Equity Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Lepanto Consolidated

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Aboitiz Equity and Lepanto Consolidated

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

The idea behind Aboitiz Equity Ventures and Lepanto Consolidated Mining 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..