Correlation Between Globe Telecom and EEI Corp

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

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

Diversification Opportunities for Globe Telecom and EEI Corp

0.71

Correlation Coefficient

Globe Telecom  EEI Corp

Poor diversification

The 3 months correlation between Globe and EEI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Globe Telecom and EEI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EEI 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 EEI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EEI Corp has no effect on the direction of Globe Telecom i.e., Globe Telecom and EEI Corp go up and down completely randomly.

Pair Corralation between Globe Telecom and EEI Corp

Assuming the 90 days trading horizon Globe Telecom is expected to generate 1.93 times less return on investment than EEI Corp. But when comparing it to its historical volatility, Globe Telecom is 3.16 times less risky than EEI Corp. It trades about 0.19 of its potential returns per unit of risk. EEI Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  334.00  in EEI Corp on October 10, 2024 and sell it today you would earn a total of  24.00  from holding EEI Corp or generate 7.19% return on investment over 90 days.

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

Globe Telecom  vs.  EEI 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.

EEI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EEI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Globe Telecom and EEI Corp

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

The idea behind Globe Telecom and EEI 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.