Correlation Between Crown Asia and Globe Telecom

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

By analyzing existing cross correlation between Crown Asia Chemicals and Globe Telecom, you can compare the effects of market volatilities on Crown Asia 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 Crown Asia with a short position of Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Asia and Globe Telecom.

Diversification Opportunities for Crown Asia and Globe Telecom

0.54

Correlation Coefficient

Crown Asia  Globe Telecom

Very weak diversification

The 3 months correlation between Crown and Globe is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and Crown Asia 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 Crown Asia Chemicals 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 Crown Asia i.e., Crown Asia and Globe Telecom go up and down completely randomly.

Pair Corralation between Crown Asia and Globe Telecom

Assuming the 90 days trading horizon Crown Asia Chemicals is expected to generate 0.98 times more return on investment than Globe Telecom. However, Crown Asia Chemicals is 1.02 times less risky than Globe Telecom. It trades about -0.05 of its potential returns per unit of risk. Globe Telecom is currently generating about -0.07 per unit of risk. If you would invest  188.00  in Crown Asia Chemicals on October 9, 2024 and sell it today you would lose (11.00) from holding Crown Asia Chemicals or give up 5.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Crown Asia Chemicals  vs.  Globe Telecom

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Globe Telecom

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Crown Asia and Globe Telecom

The main advantage of trading using opposite Crown Asia and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Asia 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 Crown Asia Chemicals 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.