Correlation Between Globe Telecom and Basic Energy

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

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

Diversification Opportunities for Globe Telecom and Basic Energy

0.41

Correlation Coefficient

Globe Telecom  Basic Energy

Very weak diversification

The 3 months correlation between Globe and Basic is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Globe Telecom and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp 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 Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Globe Telecom i.e., Globe Telecom and Basic Energy go up and down completely randomly.

Pair Corralation between Globe Telecom and Basic Energy

Assuming the 90 days trading horizon Globe Telecom is expected to generate 0.48 times more return on investment than Basic Energy. However, Globe Telecom is 2.07 times less risky than Basic Energy. It trades about 0.02 of its potential returns per unit of risk. Basic Energy Corp is currently generating about -0.05 per unit of risk. If you would invest  194,188  in Globe Telecom on October 10, 2024 and sell it today you would earn a total of  24,812  from holding Globe Telecom or generate 12.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

Globe Telecom  vs.  Basic Energy Corp

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.

Basic Energy Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Basic Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Globe Telecom and Basic Energy

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

The idea behind Globe Telecom and Basic Energy Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.