Correlation Between Ayala Corp and National Reinsurance
Can any of the company-specific risk be diversified away by investing in both Ayala Corp 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 Ayala Corp and National Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ayala Corp and National Reinsurance, you can compare the effects of market volatilities on Ayala Corp 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 Ayala Corp with a short position of National Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ayala Corp and National Reinsurance.
Diversification Opportunities for Ayala Corp and National Reinsurance
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ayala and National is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Corp and National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Reinsurance and Ayala 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 Ayala Corp 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 Ayala Corp i.e., Ayala Corp and National Reinsurance go up and down completely randomly.
Pair Corralation between Ayala Corp and National Reinsurance
Assuming the 90 days trading horizon Ayala Corp is expected to generate 16.22 times less return on investment than National Reinsurance. But when comparing it to its historical volatility, Ayala Corp is 4.27 times less risky than National Reinsurance. It trades about 0.02 of its potential returns per unit of risk. National Reinsurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 43.00 in National Reinsurance on September 12, 2024 and sell it today you would earn a total of 25.00 from holding National Reinsurance or generate 58.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.16% |
| Values | Daily Returns |
Ayala Corp vs. National Reinsurance
Performance |
| Timeline |
| Ayala Corp |
| National Reinsurance |
Ayala Corp and National Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ayala Corp and National Reinsurance
The main advantage of trading using opposite Ayala Corp and National Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ayala Corp 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.| Ayala Corp vs. National Reinsurance | Ayala Corp vs. Cebu Air Preferred | Ayala Corp vs. Metropolitan Bank Trust | Ayala Corp vs. Asia United Bank |
| National Reinsurance vs. Manulife Financial Corp | National Reinsurance vs. Sun Life Financial | National Reinsurance vs. GT Capital Holdings | National Reinsurance vs. Allhome Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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