Correlation Between THE PHILIPPINE and Berjaya Philippines

Can any of the company-specific risk be diversified away by investing in both THE PHILIPPINE and Berjaya Philippines 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 THE PHILIPPINE and Berjaya Philippines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between THE PHILIPPINE STOCK and Berjaya Philippines, you can compare the effects of market volatilities on THE PHILIPPINE and Berjaya Philippines 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 THE PHILIPPINE with a short position of Berjaya Philippines. Check out your portfolio center. Please also check ongoing floating volatility patterns of THE PHILIPPINE and Berjaya Philippines.

Diversification Opportunities for THE PHILIPPINE and Berjaya Philippines

-0.39

Correlation Coefficient

THE PHILIPPINE  Berjaya Philippines

Very good diversification

The 3 months correlation between THE and Berjaya is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK and Berjaya Philippines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berjaya Philippines and THE PHILIPPINE 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 THE PHILIPPINE STOCK are associated (or correlated) with Berjaya Philippines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berjaya Philippines has no effect on the direction of THE PHILIPPINE i.e., THE PHILIPPINE and Berjaya Philippines go up and down completely randomly.

Pair Corralation between THE PHILIPPINE and Berjaya Philippines

Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the Berjaya Philippines. But the index apears to be less risky and, when comparing its historical volatility, THE PHILIPPINE STOCK is 5.56 times less risky than Berjaya Philippines. The index trades about -0.16 of its potential returns per unit of risk. The Berjaya Philippines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Berjaya Philippines on September 25, 2024 and sell it today you would earn a total of  128.00  from holding Berjaya Philippines or generate 16.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.73%
Values	Daily Returns

THE PHILIPPINE STOCK  vs.  Berjaya Philippines

Pair Trading with THE PHILIPPINE and Berjaya Philippines

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

The idea behind THE PHILIPPINE STOCK and Berjaya Philippines 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 Stocks Directory module to find actively traded stocks across global markets.