Correlation Between First Philippine and National Reinsurance
Can any of the company-specific risk be diversified away by investing in both First Philippine 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 First Philippine and National Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Philippine Holdings and National Reinsurance, you can compare the effects of market volatilities on First Philippine 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 First Philippine with a short position of National Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Philippine and National Reinsurance.
Diversification Opportunities for First Philippine and National Reinsurance
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and National is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Philippine Holdings and National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Reinsurance and First Philippine 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 First Philippine Holdings 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 First Philippine i.e., First Philippine and National Reinsurance go up and down completely randomly.
Pair Corralation between First Philippine and National Reinsurance
Assuming the 90 days trading horizon First Philippine is expected to generate 36.13 times less return on investment than National Reinsurance. But when comparing it to its historical volatility, First Philippine Holdings is 7.0 times less risky than National Reinsurance. It trades about 0.01 of its potential returns per unit of risk. National Reinsurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 59.00 in National Reinsurance on November 27, 2024 and sell it today you would earn a total of 12.00 from holding National Reinsurance or generate 20.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 63.31% |
| Values | Daily Returns |
First Philippine Holdings vs. National Reinsurance
Performance |
| Timeline |
| First Philippine Holdings |
| National Reinsurance |
First Philippine and National Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Philippine and National Reinsurance
The main advantage of trading using opposite First Philippine and National Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Philippine 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.| First Philippine vs. Semirara Mining Corp | First Philippine vs. Bank of the | First Philippine vs. Integrated Micro Electronics | First Philippine vs. Sun Life Financial |
| National Reinsurance vs. Integrated Micro Electronics | National Reinsurance vs. Asia United Bank | National Reinsurance vs. Union Bank of | National Reinsurance vs. Robinsons Retail Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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