Correlation Between Marubeni and Ayala Corp

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

By analyzing existing cross correlation between Marubeni and Ayala Corp ADR, you can compare the effects of market volatilities on Marubeni and Ayala Corp 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 Marubeni with a short position of Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marubeni and Ayala Corp.

Diversification Opportunities for Marubeni and Ayala Corp

-0.07

Correlation Coefficient

Marubeni  Ayala Corp

Good diversification

The 3 months correlation between Marubeni and Ayala is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR and Marubeni 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 Marubeni are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp ADR has no effect on the direction of Marubeni i.e., Marubeni and Ayala Corp go up and down completely randomly.

Pair Corralation between Marubeni and Ayala Corp

Assuming the 90 days horizon Marubeni is expected to generate 3.76 times more return on investment than Ayala Corp. However, Marubeni is 3.76 times more volatile than Ayala Corp ADR. It trades about 0.11 of its potential returns per unit of risk. Ayala Corp ADR is currently generating about -0.22 per unit of risk. If you would invest  1,467  in Marubeni on September 5, 2024 and sell it today you would earn a total of  121.00  from holding Marubeni or generate 8.25% return on investment over 90 days.

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

Marubeni  vs.  Ayala Corp ADR

Marubeni

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Marubeni may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ayala Corp ADR

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Ayala Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak essential indicators, Ayala Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marubeni and Ayala Corp

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

The idea behind Marubeni and Ayala Corp ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.