Correlation Between Philippine Business and Top Frontier

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

By analyzing existing cross correlation between Philippine Business Bank and Top Frontier Investment, you can compare the effects of market volatilities on Philippine Business and Top Frontier 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 Philippine Business with a short position of Top Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philippine Business and Top Frontier.

Diversification Opportunities for Philippine Business and Top Frontier

0.28

Correlation Coefficient

Philippine Business  Top Frontier

Modest diversification

The 3 months correlation between Philippine and Top is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Philippine Business Bank and Top Frontier Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Frontier Investment and Philippine Business 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 Philippine Business Bank are associated (or correlated) with Top Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Frontier Investment has no effect on the direction of Philippine Business i.e., Philippine Business and Top Frontier go up and down completely randomly.

Pair Corralation between Philippine Business and Top Frontier

Assuming the 90 days trading horizon Philippine Business Bank is expected to generate 0.69 times more return on investment than Top Frontier. However, Philippine Business Bank is 1.45 times less risky than Top Frontier. It trades about 0.1 of its potential returns per unit of risk. Top Frontier Investment is currently generating about -0.03 per unit of risk. If you would invest  774.00  in Philippine Business Bank on May 6, 2025 and sell it today you would earn a total of  109.00  from holding Philippine Business Bank or generate 14.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.83%
Values	Daily Returns

Philippine Business Bank  vs.  Top Frontier Investment

Philippine Business Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Philippine Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Top Frontier Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Philippine Business and Top Frontier

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

The idea behind Philippine Business Bank and Top Frontier Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.