Correlation Between Transpacific Broadband and PLDT

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

By analyzing existing cross correlation between Transpacific Broadband Group and PLDT Inc, you can compare the effects of market volatilities on Transpacific Broadband and PLDT 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 Transpacific Broadband with a short position of PLDT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transpacific Broadband and PLDT.

Diversification Opportunities for Transpacific Broadband and PLDT

-0.31

Correlation Coefficient

Transpacific Broadband  PLDT

Very good diversification

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

Pair Corralation between Transpacific Broadband and PLDT

Assuming the 90 days trading horizon Transpacific Broadband Group is expected to under-perform the PLDT. In addition to that, Transpacific Broadband is 2.04 times more volatile than PLDT Inc. It trades about -0.01 of its total potential returns per unit of risk. PLDT Inc is currently generating about 0.02 per unit of volatility. If you would invest  114,588  in PLDT Inc on September 18, 2024 and sell it today you would earn a total of  11,412  from holding PLDT Inc or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.1%
Values	Daily Returns

Transpacific Broadband Group  vs.  PLDT Inc

Transpacific Broadband

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transpacific Broadband Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Transpacific Broadband unveiled solid returns over the last few months and may actually be approaching a breakup point.

PLDT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLDT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Transpacific Broadband and PLDT

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

The idea behind Transpacific Broadband Group and PLDT Inc 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.

Check out your portfolio center.

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.