Correlation Between THE PHILIPPINE and Nickel Asia

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

Diversification Opportunities for THE PHILIPPINE and Nickel Asia

0.87

Correlation Coefficient

THE PHILIPPINE  Nickel Asia

Very poor diversification

The 3 months correlation between THE and Nickel is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK and Nickel Asia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Asia Corp 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 Nickel Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Asia Corp has no effect on the direction of THE PHILIPPINE i.e., THE PHILIPPINE and Nickel Asia go up and down completely randomly.

Pair Corralation between THE PHILIPPINE and Nickel Asia

Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the Nickel Asia. But the index apears to be less risky and, when comparing its historical volatility, THE PHILIPPINE STOCK is 2.03 times less risky than Nickel Asia. The index trades about -0.09 of its potential returns per unit of risk. The Nickel Asia Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  321.00  in Nickel Asia Corp on September 14, 2024 and sell it today you would lose (21.00) from holding Nickel Asia Corp or give up 6.54% of portfolio value over 90 days.

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

THE PHILIPPINE STOCK  vs.  Nickel Asia Corp

Pair Trading with THE PHILIPPINE and Nickel Asia

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

The idea behind THE PHILIPPINE STOCK and Nickel Asia Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.