Correlation Between Philippine National and Philippine Savings

Can any of the company-specific risk be diversified away by investing in both Philippine National and Philippine Savings 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 Philippine Savings 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 Philippine Savings Bank, you can compare the effects of market volatilities on Philippine National and Philippine Savings 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 Philippine Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine National and Philippine Savings.

Diversification Opportunities for Philippine National and Philippine Savings

0.61

Correlation Coefficient

Philippine National  Philippine Savings

Poor diversification

The 3 months correlation between Philippine and Philippine is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Philippine National Bank and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings Bank 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 Philippine Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of Philippine National i.e., Philippine National and Philippine Savings go up and down completely randomly.

Pair Corralation between Philippine National and Philippine Savings

Assuming the 90 days trading horizon Philippine National Bank is expected to generate 1.21 times more return on investment than Philippine Savings. However, Philippine National is 1.21 times more volatile than Philippine Savings Bank. It trades about 0.07 of its potential returns per unit of risk. Philippine Savings Bank is currently generating about 0.08 per unit of risk. If you would invest  2,370  in Philippine National Bank on September 16, 2024 and sell it today you would earn a total of  230.00  from holding Philippine National Bank or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Philippine National Bank  vs.  Philippine Savings Bank

Philippine National Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine National Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Philippine Savings Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Savings Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine Savings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Philippine National and Philippine Savings

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

The idea behind Philippine National Bank and Philippine Savings Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.