Correlation Between Alliance Select and Globe Telecom

Can any of the company-specific risk be diversified away by investing in both Alliance Select 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 Select 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 Select Foods and Globe Telecom, you can compare the effects of market volatilities on Alliance Select 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 Select with a short position of Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Select and Globe Telecom.

Diversification Opportunities for Alliance Select and Globe Telecom

0.15

Correlation Coefficient

Alliance Select  Globe Telecom

Average diversification

The 3 months correlation between Alliance and Globe is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and Alliance Select 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 Select Foods 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 Select i.e., Alliance Select and Globe Telecom go up and down completely randomly.

Pair Corralation between Alliance Select and Globe Telecom

Assuming the 90 days trading horizon Alliance Select Foods is expected to under-perform the Globe Telecom. In addition to that, Alliance Select is 1.49 times more volatile than Globe Telecom. It trades about -0.07 of its total potential returns per unit of risk. Globe Telecom is currently generating about -0.02 per unit of volatility. If you would invest  220,190  in Globe Telecom on September 4, 2024 and sell it today you would lose (7,190) from holding Globe Telecom or give up 3.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	53.13%
Values	Daily Returns

Alliance Select Foods  vs.  Globe Telecom

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 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 Alliance Select and Globe Telecom

The main advantage of trading using opposite Alliance Select and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Select 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 Select Foods 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..