Correlation Between Swire Pacific and Ayala Corp

Can any of the company-specific risk be diversified away by investing in both Swire Pacific and Ayala Corp 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 Swire Pacific and Ayala Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Swire Pacific and Ayala Corp ADR, you can compare the effects of market volatilities on Swire Pacific and Ayala Corp 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 Swire Pacific with a short position of Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Pacific and Ayala Corp.

Diversification Opportunities for Swire Pacific and Ayala Corp

0.31

Correlation Coefficient

Swire Pacific  Ayala Corp

Weak diversification

The 3 months correlation between Swire and Ayala is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR and Swire Pacific 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 Swire Pacific are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp ADR has no effect on the direction of Swire Pacific i.e., Swire Pacific and Ayala Corp go up and down completely randomly.

Pair Corralation between Swire Pacific and Ayala Corp

Assuming the 90 days horizon Swire Pacific is expected to generate 1.57 times more return on investment than Ayala Corp. However, Swire Pacific is 1.57 times more volatile than Ayala Corp ADR. It trades about 0.04 of its potential returns per unit of risk. Ayala Corp ADR is currently generating about -0.22 per unit of risk. If you would invest  845.00  in Swire Pacific on September 5, 2024 and sell it today you would earn a total of  10.00  from holding Swire Pacific or generate 1.18% return on investment over 90 days.

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

Swire Pacific  vs.  Ayala Corp ADR

Swire Pacific

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Swire Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ayala Corp ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ayala Corp ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Ayala Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swire Pacific and Ayala Corp

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

The idea behind Swire Pacific and Ayala Corp ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.