Correlation Between Globe Life and United States

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

By analyzing existing cross correlation between Globe Life 425 and United States Cellular, you can compare the effects of market volatilities on Globe Life and United States 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 Globe Life with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Life and United States.

Diversification Opportunities for Globe Life and United States

-0.67

Correlation Coefficient

Globe Life  United States

Excellent diversification

The 3 months correlation between Globe and United is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life 425 and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular and Globe Life 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 Globe Life 425 are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Globe Life i.e., Globe Life and United States go up and down completely randomly.

Pair Corralation between Globe Life and United States

Assuming the 90 days horizon Globe Life 425 is expected to under-perform the United States. In addition to that, Globe Life is 2.34 times more volatile than United States Cellular. It trades about -0.11 of its total potential returns per unit of risk. United States Cellular is currently generating about 0.1 per unit of volatility. If you would invest  2,154  in United States Cellular on September 21, 2024 and sell it today you would earn a total of  75.00  from holding United States Cellular or generate 3.48% return on investment over 90 days.

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

Globe Life 425  vs.  United States Cellular

Globe Life 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life 425 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

United States Cellular

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Globe Life and United States

The main advantage of trading using opposite Globe Life and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Life position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.

The idea behind Globe Life 425 and United States Cellular 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .