Correlation Between Koninklijke Philips and Phihong Technology

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

By analyzing existing cross correlation between Koninklijke Philips NV and Phihong Technology Co, you can compare the effects of market volatilities on Koninklijke Philips and Phihong Technology 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 Koninklijke Philips with a short position of Phihong Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Phihong Technology.

Diversification Opportunities for Koninklijke Philips and Phihong Technology

-0.2

Correlation Coefficient

Koninklijke Philips  Phihong Technology

Good diversification

The 3 months correlation between Koninklijke and Phihong is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Phihong Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phihong Technology and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with Phihong Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phihong Technology has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and Phihong Technology go up and down completely randomly.

Pair Corralation between Koninklijke Philips and Phihong Technology

Considering the 90-day investment horizon Koninklijke Philips NV is expected to generate 1.67 times more return on investment than Phihong Technology. However, Koninklijke Philips is 1.67 times more volatile than Phihong Technology Co. It trades about 0.12 of its potential returns per unit of risk. Phihong Technology Co is currently generating about -0.05 per unit of risk. If you would invest  2,093  in Koninklijke Philips NV on February 2, 2024 and sell it today you would earn a total of  563.00  from holding Koninklijke Philips NV or generate 26.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

Koninklijke Philips NV  vs.  Phihong Technology Co

Koninklijke Philips

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Philips NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Koninklijke Philips reported solid returns over the last few months and may actually be approaching a breakup point.

Phihong Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phihong Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Koninklijke Philips and Phihong Technology

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

The idea behind Koninklijke Philips NV and Phihong Technology Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.