Correlation Between National Reinsurance and Globe Telecom

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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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.97%
ValuesDaily Returns

National Reinsurance  vs.  Globe Telecom

 Performance 
       Timeline  
National Reinsurance 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

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Weak
 
Strong
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.

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.
The idea behind National Reinsurance and Globe Telecom 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.
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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