Correlation Between Philippine Savings and VistaREIT

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

Diversification Opportunities for Philippine Savings and VistaREIT

0.29

Correlation Coefficient

Philippine Savings  VistaREIT

Modest diversification

The 3 months correlation between Philippine and VistaREIT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Savings Bank and VistaREIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VistaREIT 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 VistaREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VistaREIT has no effect on the direction of Philippine Savings i.e., Philippine Savings and VistaREIT go up and down completely randomly.

Pair Corralation between Philippine Savings and VistaREIT

Assuming the 90 days trading horizon Philippine Savings Bank is expected to generate 2.34 times more return on investment than VistaREIT. However, Philippine Savings is 2.34 times more volatile than VistaREIT. It trades about 0.05 of its potential returns per unit of risk. VistaREIT is currently generating about 0.13 per unit of risk. If you would invest  5,570  in Philippine Savings Bank on September 12, 2024 and sell it today you would earn a total of  300.00  from holding Philippine Savings Bank or generate 5.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Philippine Savings Bank  vs.  VistaREIT

Philippine Savings Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Savings Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Philippine Savings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VistaREIT

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VistaREIT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, VistaREIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Philippine Savings and VistaREIT

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

The idea behind Philippine Savings Bank and VistaREIT 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.