Correlation Between East West and Globe Telecom

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

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

Diversification Opportunities for East West and Globe Telecom

0.07

Correlation Coefficient

East West  Globe Telecom

Significant diversification

The 3 months correlation between East and Globe is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and East West 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 East West Banking 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 East West i.e., East West and Globe Telecom go up and down completely randomly.

Pair Corralation between East West and Globe Telecom

Assuming the 90 days trading horizon East West Banking is expected to generate 0.69 times more return on investment than Globe Telecom. However, East West Banking is 1.46 times less risky than Globe Telecom. It trades about 0.12 of its potential returns per unit of risk. Globe Telecom is currently generating about -0.02 per unit of risk. If you would invest  899.00  in East West Banking on September 4, 2024 and sell it today you would earn a total of  84.00  from holding East West Banking or generate 9.34% return on investment over 90 days.

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

East West Banking  vs.  Globe Telecom

East West Banking

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in East West Banking are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, East West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 rather sound technical and fundamental indicators, Globe Telecom is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with East West and Globe Telecom

The main advantage of trading using opposite East West and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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 East West Banking 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 Global Correlations module to find global opportunities by holding instruments from different markets.