Correlation Between Figaro Coffee and BDO Unibank

Can any of the company-specific risk be diversified away by investing in both Figaro Coffee and BDO Unibank 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 Figaro Coffee and BDO Unibank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Figaro Coffee Group and BDO Unibank, you can compare the effects of market volatilities on Figaro Coffee and BDO Unibank 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 Figaro Coffee with a short position of BDO Unibank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figaro Coffee and BDO Unibank.

Diversification Opportunities for Figaro Coffee and BDO Unibank

0.24

Correlation Coefficient

Figaro Coffee  BDO Unibank

Modest diversification

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

Pair Corralation between Figaro Coffee and BDO Unibank

Assuming the 90 days trading horizon Figaro Coffee Group is expected to generate 1.23 times more return on investment than BDO Unibank. However, Figaro Coffee is 1.23 times more volatile than BDO Unibank. It trades about 0.04 of its potential returns per unit of risk. BDO Unibank is currently generating about 0.0 per unit of risk. If you would invest  79.00  in Figaro Coffee Group on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Figaro Coffee Group or generate 5.06% return on investment over 90 days.

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

Figaro Coffee Group  vs.  BDO Unibank

Figaro Coffee Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Figaro Coffee Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Figaro Coffee may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BDO Unibank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BDO Unibank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BDO Unibank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Figaro Coffee and BDO Unibank

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

The idea behind Figaro Coffee Group and BDO Unibank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.