Correlation Between National Reinsurance and Philippine Seven

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

Diversification Opportunities for National Reinsurance and Philippine Seven

0.67

Correlation Coefficient

National Reinsurance  Philippine Seven

Poor diversification

The 3 months correlation between National and Philippine is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Philippine Seven Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Seven Corp 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 Seven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Seven Corp has no effect on the direction of National Reinsurance i.e., National Reinsurance and Philippine Seven go up and down completely randomly.

Pair Corralation between National Reinsurance and Philippine Seven

Assuming the 90 days trading horizon National Reinsurance is expected to under-perform the Philippine Seven. In addition to that, National Reinsurance is 2.4 times more volatile than Philippine Seven Corp. It trades about -0.05 of its total potential returns per unit of risk. Philippine Seven Corp is currently generating about -0.02 per unit of volatility. If you would invest  7,100  in Philippine Seven Corp on October 8, 2024 and sell it today you would lose (250.00) from holding Philippine Seven Corp or give up 3.52% of portfolio value over 90 days.

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

National Reinsurance  vs.  Philippine Seven Corp

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 Seven Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine Seven Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Philippine Seven is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Reinsurance and Philippine Seven

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

The idea behind National Reinsurance and Philippine Seven Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.