Correlation Between Crown Asia and Philippine Savings

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

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

Diversification Opportunities for Crown Asia and Philippine Savings

-0.11

Correlation Coefficient

Crown Asia  Philippine Savings

Good diversification

The 3 months correlation between Crown and Philippine is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings Bank and Crown Asia 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 Crown Asia Chemicals are associated (or correlated) with Philippine Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of Crown Asia i.e., Crown Asia and Philippine Savings go up and down completely randomly.

Pair Corralation between Crown Asia and Philippine Savings

Assuming the 90 days trading horizon Crown Asia Chemicals is expected to under-perform the Philippine Savings. In addition to that, Crown Asia is 1.05 times more volatile than Philippine Savings Bank. It trades about 0.0 of its total potential returns per unit of risk. Philippine Savings Bank is currently generating about 0.08 per unit of volatility. If you would invest  5,555  in Philippine Savings Bank on September 14, 2024 and sell it today you would earn a total of  495.00  from holding Philippine Savings Bank or generate 8.91% return on investment over 90 days.

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

Crown Asia Chemicals  vs.  Philippine Savings Bank

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Philippine Savings Bank

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Savings Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Philippine Savings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crown Asia and Philippine Savings

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

The idea behind Crown Asia Chemicals and Philippine Savings Bank 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.