Correlation Between RFM Corp and Globe Telecom

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

By analyzing existing cross correlation between RFM Corp and Globe Telecom, you can compare the effects of market volatilities on RFM Corp 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 RFM Corp with a short position of Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of RFM Corp and Globe Telecom.

Diversification Opportunities for RFM Corp and Globe Telecom

-0.52

Correlation Coefficient

RFM Corp  Globe Telecom

Excellent diversification

The 3 months correlation between RFM and Globe is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding RFM Corp and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and RFM Corp 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 RFM Corp 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 RFM Corp i.e., RFM Corp and Globe Telecom go up and down completely randomly.

Pair Corralation between RFM Corp and Globe Telecom

Assuming the 90 days trading horizon RFM Corp is expected to under-perform the Globe Telecom. But the stock apears to be less risky and, when comparing its historical volatility, RFM Corp is 1.48 times less risky than Globe Telecom. The stock trades about -0.01 of its potential returns per unit of risk. The Globe Telecom is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  210,000  in Globe Telecom on October 10, 2024 and sell it today you would earn a total of  9,000  from holding Globe Telecom or generate 4.29% return on investment over 90 days.

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

RFM Corp  vs.  Globe Telecom

RFM Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFM Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RFM Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Globe Telecom

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with RFM Corp and Globe Telecom

The main advantage of trading using opposite RFM Corp and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RFM Corp 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 RFM Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.