Correlation Between National Reinsurance and Philippine National

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

By analyzing existing cross correlation between National Reinsurance and Philippine National Bank, you can compare the effects of market volatilities on National Reinsurance and Philippine National 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 Philippine National. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Reinsurance and Philippine National.

Diversification Opportunities for National Reinsurance and Philippine National

0.12

Correlation Coefficient

National Reinsurance  Philippine National

Average diversification

The 3 months correlation between National and Philippine is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Philippine National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine National Bank 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 Philippine National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine National Bank has no effect on the direction of National Reinsurance i.e., National Reinsurance and Philippine National go up and down completely randomly.

Pair Corralation between National Reinsurance and Philippine National

Assuming the 90 days trading horizon National Reinsurance is expected to under-perform the Philippine National. In addition to that, National Reinsurance is 3.38 times more volatile than Philippine National Bank. It trades about -0.04 of its total potential returns per unit of risk. Philippine National Bank is currently generating about 0.1 per unit of volatility. If you would invest  2,770  in Philippine National Bank on October 12, 2024 and sell it today you would earn a total of  220.00  from holding Philippine National Bank or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

National Reinsurance  vs.  Philippine National Bank

National Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

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 uncertain 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.

Philippine National Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine National Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Philippine National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Reinsurance and Philippine National

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

The idea behind National Reinsurance and Philippine National Bank 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.