Correlation Between Philippine Business and GT Capital

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

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

Diversification Opportunities for Philippine Business and GT Capital

-0.7

Correlation Coefficient

Philippine Business  GT Capital

Excellent diversification

The 3 months correlation between Philippine and GTCAP is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings and Philippine Business 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 Philippine Business Bank are associated (or correlated) with GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Philippine Business i.e., Philippine Business and GT Capital go up and down completely randomly.

Pair Corralation between Philippine Business and GT Capital

Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 0.89 times more return on investment than GT Capital. However, Philippine Business Bank is 1.12 times less risky than GT Capital. It trades about 0.15 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.08 per unit of risk. If you would invest  835.00  in Philippine Business Bank on September 13, 2024 and sell it today you would earn a total of  115.00  from holding Philippine Business Bank or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

Philippine Business Bank  vs.  GT Capital Holdings

Philippine Business Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Philippine Business and GT Capital

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

The idea behind Philippine Business Bank and GT Capital Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.