Correlation Between National Reinsurance and Philippine Savings

Can any of the company-specific risk be diversified away by investing in both National Reinsurance and Philippine Savings 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 Savings 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 Savings Bank, you can compare the effects of market volatilities on National Reinsurance and Philippine Savings 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 Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Reinsurance and Philippine Savings.

Diversification Opportunities for National Reinsurance and Philippine Savings

0.33

Correlation Coefficient

National Reinsurance  Philippine Savings

Weak diversification

The 3 months correlation between National and Philippine is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings 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 Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of National Reinsurance i.e., National Reinsurance and Philippine Savings go up and down completely randomly.

Pair Corralation between National Reinsurance and Philippine Savings

Assuming the 90 days trading horizon National Reinsurance is expected to under-perform the Philippine Savings. In addition to that, National Reinsurance is 2.9 times more volatile than Philippine Savings Bank. It trades about -0.08 of its total potential returns per unit of risk. Philippine Savings Bank is currently generating about -0.01 per unit of volatility. If you would invest  5,920  in Philippine Savings Bank on October 26, 2024 and sell it today you would lose (85.00) from holding Philippine Savings Bank or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.55%
Values	Daily Returns

National Reinsurance  vs.  Philippine Savings 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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Philippine Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine Savings Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Philippine Savings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Reinsurance and Philippine Savings

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

The idea behind National Reinsurance and Philippine Savings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.