Correlation Between THE PHILIPPINE and National Reinsurance
Can any of the company-specific risk be diversified away by investing in both THE 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 THE 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 THE PHILIPPINE STOCK and National Reinsurance, you can compare the effects of market volatilities on THE 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 THE PHILIPPINE with a short position of National Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of THE PHILIPPINE and National Reinsurance.
Diversification Opportunities for THE PHILIPPINE and National Reinsurance
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between THE and National is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK and National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Reinsurance and THE 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 THE PHILIPPINE STOCK 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 THE PHILIPPINE i.e., THE PHILIPPINE and National Reinsurance go up and down completely randomly.
Pair Corralation between THE PHILIPPINE and National Reinsurance
Assuming the 90 days trading horizon THE PHILIPPINE STOCK is expected to under-perform the National Reinsurance. But the index apears to be less risky and, when comparing its historical volatility, THE PHILIPPINE STOCK is 7.85 times less risky than National Reinsurance. The index trades about 0.0 of its potential returns per unit of risk. The National Reinsurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 61.00 in National Reinsurance on September 3, 2024 and sell it today you would lose (2.00) from holding National Reinsurance or give up 3.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 58.24% |
| Values | Daily Returns |
THE PHILIPPINE STOCK vs. National Reinsurance
Performance |
| Timeline |
THE PHILIPPINE and National Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
THE PHILIPPINE STOCK
Pair trading matchups for THE PHILIPPINE
National Reinsurance
Pair trading matchups for National Reinsurance
Pair Trading with THE PHILIPPINE and National Reinsurance
The main advantage of trading using opposite THE PHILIPPINE and National Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THE 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.| THE PHILIPPINE vs. Bank of the | THE PHILIPPINE vs. Sun Life Financial | THE PHILIPPINE vs. Philippine Business Bank | THE PHILIPPINE vs. Allhome Corp |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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