Correlation Between Philex Mining and First Abacus

Can any of the company-specific risk be diversified away by investing in both Philex Mining and First Abacus 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 Philex Mining and First Abacus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Philex Mining Corp and First Abacus Financial, you can compare the effects of market volatilities on Philex Mining and First Abacus 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 Philex Mining with a short position of First Abacus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philex Mining and First Abacus.

Diversification Opportunities for Philex Mining and First Abacus

-0.27

Correlation Coefficient

Philex Mining  First Abacus

Very good diversification

The 3 months correlation between Philex and First is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Philex Mining Corp and First Abacus Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Abacus Financial and Philex Mining 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 Philex Mining Corp are associated (or correlated) with First Abacus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Abacus Financial has no effect on the direction of Philex Mining i.e., Philex Mining and First Abacus go up and down completely randomly.

Pair Corralation between Philex Mining and First Abacus

Assuming the 90 days trading horizon Philex Mining Corp is expected to under-perform the First Abacus. But the stock apears to be less risky and, when comparing its historical volatility, Philex Mining Corp is 2.85 times less risky than First Abacus. The stock trades about -0.01 of its potential returns per unit of risk. The First Abacus Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  61.00  in First Abacus Financial on September 14, 2024 and sell it today you would earn a total of  2.00  from holding First Abacus Financial or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.0%
Values	Daily Returns

Philex Mining Corp  vs.  First Abacus Financial

Philex Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philex Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Philex Mining is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Abacus Financial

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, First Abacus exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philex Mining and First Abacus

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

The idea behind Philex Mining Corp and First Abacus Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.