Correlation Between Philippine Savings and East West

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Can any of the company-specific risk be diversified away by investing in both Philippine Savings and East West 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 Savings and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Philippine Savings Bank and East West Banking, you can compare the effects of market volatilities on Philippine Savings and East West 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 Savings with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Savings and East West.

Diversification Opportunities for Philippine Savings and East West

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Philippine and East is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings Bank and East West Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Banking and Philippine Savings 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 Savings Bank are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Banking has no effect on the direction of Philippine Savings i.e., Philippine Savings and East West go up and down completely randomly.

Pair Corralation between Philippine Savings and East West

Assuming the 90 days trading horizon Philippine Savings is expected to generate 2.23 times less return on investment than East West. In addition to that, Philippine Savings is 4.34 times more volatile than East West Banking. It trades about 0.03 of its total potential returns per unit of risk. East West Banking is currently generating about 0.24 per unit of volatility. If you would invest  980.00  in East West Banking on September 17, 2024 and sell it today you would earn a total of  30.00  from holding East West Banking or generate 3.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy90.91%
ValuesDaily Returns

Philippine Savings Bank  vs.  East West Banking

 Performance 
       Timeline  
Philippine Savings Bank 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
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.
East West Banking 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, East West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Philippine Savings and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Philippine Savings and East West

The main advantage of trading using opposite Philippine Savings and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philippine Savings position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
The idea behind Philippine Savings Bank and East West Banking 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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