Correlation Between Rizal Commercial and National Reinsurance

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

By analyzing existing cross correlation between Rizal Commercial Banking and National Reinsurance, you can compare the effects of market volatilities on Rizal Commercial and National Reinsurance 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 Rizal Commercial with a short position of National Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rizal Commercial and National Reinsurance.

Diversification Opportunities for Rizal Commercial and National Reinsurance

0.51

Correlation Coefficient

Rizal Commercial  National Reinsurance

Very weak diversification

The 3 months correlation between Rizal and National is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking and National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Reinsurance and Rizal Commercial 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 Rizal Commercial Banking are associated (or correlated) with National Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Reinsurance has no effect on the direction of Rizal Commercial i.e., Rizal Commercial and National Reinsurance go up and down completely randomly.

Pair Corralation between Rizal Commercial and National Reinsurance

Assuming the 90 days trading horizon Rizal Commercial Banking is expected to generate 0.53 times more return on investment than National Reinsurance. However, Rizal Commercial Banking is 1.9 times less risky than National Reinsurance. It trades about 0.03 of its potential returns per unit of risk. National Reinsurance is currently generating about -0.03 per unit of risk. If you would invest  2,445  in Rizal Commercial Banking on September 14, 2024 and sell it today you would earn a total of  50.00  from holding Rizal Commercial Banking or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Rizal Commercial Banking  vs.  National Reinsurance

Rizal Commercial Banking

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rizal Commercial Banking are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rizal Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 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.

Pair Trading with Rizal Commercial and National Reinsurance

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

The idea behind Rizal Commercial Banking and National Reinsurance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.