Correlation Between Globe Telecom and Alliance Select

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

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

Diversification Opportunities for Globe Telecom and Alliance Select

0.11

Correlation Coefficient

Globe Telecom  Alliance Select

Average diversification

The 3 months correlation between Globe and Alliance is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Globe Telecom and Alliance Select Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Select Foods 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 Alliance Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Select Foods has no effect on the direction of Globe Telecom i.e., Globe Telecom and Alliance Select go up and down completely randomly.

Pair Corralation between Globe Telecom and Alliance Select

Assuming the 90 days trading horizon Globe Telecom is expected to generate 0.68 times more return on investment than Alliance Select. However, Globe Telecom is 1.46 times less risky than Alliance Select. It trades about -0.03 of its potential returns per unit of risk. Alliance Select Foods is currently generating about -0.07 per unit of risk. If you would invest  219,795  in Globe Telecom on August 31, 2024 and sell it today you would lose (9,795) from holding Globe Telecom or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.56%
Values	Daily Returns

Globe Telecom  vs.  Alliance Select Foods

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.

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 weak 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.

Pair Trading with Globe Telecom and Alliance Select

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

The idea behind Globe Telecom and Alliance Select Foods 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.