Correlation Between Lepanto Consolidated and AyalaLand REIT

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

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

Diversification Opportunities for Lepanto Consolidated and AyalaLand REIT

0.35

Correlation Coefficient

Lepanto Consolidated  AyalaLand REIT

Weak diversification

The 3 months correlation between Lepanto and AyalaLand is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and AyalaLand REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AyalaLand REIT and Lepanto Consolidated 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 Lepanto Consolidated Mining are associated (or correlated) with AyalaLand REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AyalaLand REIT has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and AyalaLand REIT go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and AyalaLand REIT

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to generate 3.67 times more return on investment than AyalaLand REIT. However, Lepanto Consolidated is 3.67 times more volatile than AyalaLand REIT. It trades about 0.06 of its potential returns per unit of risk. AyalaLand REIT is currently generating about 0.03 per unit of risk. If you would invest  6.20  in Lepanto Consolidated Mining on September 23, 2024 and sell it today you would earn a total of  0.60  from holding Lepanto Consolidated Mining or generate 9.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.62%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  AyalaLand REIT

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

AyalaLand REIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AyalaLand REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AyalaLand REIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lepanto Consolidated and AyalaLand REIT

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

The idea behind Lepanto Consolidated Mining and AyalaLand REIT 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.