Correlation Between Alliance Global and Globe Telecom

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Can any of the company-specific risk be diversified away by investing in both Alliance Global and Globe Telecom 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 Alliance Global and Globe Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Global Group and Globe Telecom, you can compare the effects of market volatilities on Alliance Global and Globe Telecom 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 Alliance Global with a short position of Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Global and Globe Telecom.

Diversification Opportunities for Alliance Global and Globe Telecom

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alliance and Globe is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Global Group and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and Alliance Global 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 Alliance Global Group are associated (or correlated) with Globe Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Telecom has no effect on the direction of Alliance Global i.e., Alliance Global and Globe Telecom go up and down completely randomly.

Pair Corralation between Alliance Global and Globe Telecom

Assuming the 90 days trading horizon Alliance Global is expected to generate 1.18 times less return on investment than Globe Telecom. But when comparing it to its historical volatility, Alliance Global Group is 1.11 times less risky than Globe Telecom. It trades about 0.04 of its potential returns per unit of risk. Globe Telecom is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  203,507  in Globe Telecom on October 4, 2024 and sell it today you would earn a total of  14,893  from holding Globe Telecom or generate 7.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alliance Global Group  vs.  Globe Telecom

 Performance 
       Timeline  
Alliance Global Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Alliance Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Globe Telecom 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Globe Telecom 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.

Alliance Global and Globe Telecom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alliance Global and Globe Telecom

The main advantage of trading using opposite Alliance Global and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Global position performs unexpectedly, Globe Telecom 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 Globe Telecom will offset losses from the drop in Globe Telecom's long position.
The idea behind Alliance Global Group and Globe Telecom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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