Correlation Between National Reinsurance and Globe Telecom
Can any of the company-specific risk be diversified away by investing in both National Reinsurance 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 National Reinsurance and Globe Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Reinsurance and Globe Telecom, you can compare the effects of market volatilities on National Reinsurance 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 National Reinsurance with a short position of Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Reinsurance and Globe Telecom.
Diversification Opportunities for National Reinsurance and Globe Telecom
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Globe is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and National Reinsurance 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 National Reinsurance 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 National Reinsurance i.e., National Reinsurance and Globe Telecom go up and down completely randomly.
Pair Corralation between National Reinsurance and Globe Telecom
Assuming the 90 days trading horizon National Reinsurance is expected to generate 3.14 times more return on investment than Globe Telecom. However, National Reinsurance is 3.14 times more volatile than Globe Telecom. It trades about 0.08 of its potential returns per unit of risk. Globe Telecom is currently generating about 0.04 per unit of risk. If you would invest 48.00 in National Reinsurance on September 29, 2024 and sell it today you would earn a total of 21.00 from holding National Reinsurance or generate 43.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.97% |
Values | Daily Returns |
National Reinsurance vs. Globe Telecom
Performance |
Timeline |
National Reinsurance |
Globe Telecom |
National Reinsurance and Globe Telecom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Reinsurance and Globe Telecom
The main advantage of trading using opposite National Reinsurance and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Reinsurance 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.National Reinsurance vs. Sun Life Financial | National Reinsurance vs. VistaREIT | National Reinsurance vs. RFM Corp | National Reinsurance vs. Philippine National Bank |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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