Correlation Between Philippine National and COL Financial

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

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

Diversification Opportunities for Philippine National and COL Financial

0.57

Correlation Coefficient

Philippine National  COL Financial

Very weak diversification

The 3 months correlation between Philippine and COL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and COL Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COL Financial Group and Philippine National 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 National Bank are associated (or correlated) with COL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COL Financial Group has no effect on the direction of Philippine National i.e., Philippine National and COL Financial go up and down completely randomly.

Pair Corralation between Philippine National and COL Financial

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 0.6 times more return on investment than COL Financial. However, Philippine National Bank is 1.67 times less risky than COL Financial. It trades about 0.0 of its potential returns per unit of risk. COL Financial Group is currently generating about -0.04 per unit of risk. If you would invest  2,800  in Philippine National Bank on September 29, 2024 and sell it today you would lose (30.00) from holding Philippine National Bank or give up 1.07% of portfolio value over 90 days.

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

Philippine National Bank  vs.  COL Financial Group

Philippine National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

COL Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Philippine National and COL Financial

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

The idea behind Philippine National Bank and COL Financial Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.