Correlation Between Globe Telecom and Bank of the

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

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

Diversification Opportunities for Globe Telecom and Bank of the

0.5

Correlation Coefficient

Globe Telecom  Bank of the

Very weak diversification

The 3 months correlation between Globe and Bank is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Globe Telecom and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the and Globe Telecom 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 Globe Telecom are associated (or correlated) with Bank of the. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the has no effect on the direction of Globe Telecom i.e., Globe Telecom and Bank of the go up and down completely randomly.

Pair Corralation between Globe Telecom and Bank of the

Assuming the 90 days trading horizon Globe Telecom is expected to generate 0.85 times more return on investment than Bank of the. However, Globe Telecom is 1.18 times less risky than Bank of the. It trades about 0.31 of its potential returns per unit of risk. Bank of the is currently generating about -0.2 per unit of risk. If you would invest  210,000  in Globe Telecom on October 11, 2024 and sell it today you would earn a total of  20,000  from holding Globe Telecom or generate 9.52% return on investment over 90 days.

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

Globe Telecom  vs.  Bank of the

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bank of the

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Globe Telecom and Bank of the

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

The idea behind Globe Telecom and Bank of the 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.