Correlation Between Everest and Globe Life

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

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

Diversification Opportunities for Everest and Globe Life

0.28

Correlation Coefficient

Everest  Globe Life

Modest diversification

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

Pair Corralation between Everest and Globe Life

Allowing for the 90-day total investment horizon Everest is expected to generate 1.6 times less return on investment than Globe Life. But when comparing it to its historical volatility, Everest Group is 1.89 times less risky than Globe Life. It trades about 0.02 of its potential returns per unit of risk. Globe Life is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,538  in Globe Life on October 11, 2024 and sell it today you would lose (126.00) from holding Globe Life or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Everest Group  vs.  Globe Life

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everest Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Everest is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Globe Life

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Life are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Globe Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Everest and Globe Life

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

The idea behind Everest Group and Globe Life 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.