Correlation Between Century Pacific and Globe Telecom

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

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

Diversification Opportunities for Century Pacific and Globe Telecom

-0.61

Correlation Coefficient

Century Pacific  Globe Telecom

Excellent diversification

The 3 months correlation between Century and Globe is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Century Pacific Food and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom and Century Pacific 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 Century Pacific Food 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 Century Pacific i.e., Century Pacific and Globe Telecom go up and down completely randomly.

Pair Corralation between Century Pacific and Globe Telecom

Assuming the 90 days trading horizon Century Pacific Food is expected to generate 0.98 times more return on investment than Globe Telecom. However, Century Pacific Food is 1.02 times less risky than Globe Telecom. It trades about 0.09 of its potential returns per unit of risk. Globe Telecom is currently generating about -0.05 per unit of risk. If you would invest  3,850  in Century Pacific Food on September 24, 2024 and sell it today you would earn a total of  350.00  from holding Century Pacific Food or generate 9.09% return on investment over 90 days.

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

Century Pacific Food  vs.  Globe Telecom

Century Pacific Food

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Century Pacific Food are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Century Pacific may actually be approaching a critical reversion point that can send shares even higher in January 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 rather sound technical and fundamental indicators, Globe Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Century Pacific and Globe Telecom

The main advantage of trading using opposite Century Pacific and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Pacific 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 Century Pacific Food 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.