Correlation Between Globe Telecom and GT Capital

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

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

Diversification Opportunities for Globe Telecom and GT Capital

0.58

Correlation Coefficient

Globe Telecom  GT Capital

Very weak diversification

The 3 months correlation between Globe and GTCAP is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Globe Telecom and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings and Globe Telecom 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 Telecom are associated (or correlated) with GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Globe Telecom i.e., Globe Telecom and GT Capital go up and down completely randomly.

Pair Corralation between Globe Telecom and GT Capital

Assuming the 90 days trading horizon Globe Telecom is expected to under-perform the GT Capital. But the stock apears to be less risky and, when comparing its historical volatility, Globe Telecom is 1.01 times less risky than GT Capital. The stock trades about -0.03 of its potential returns per unit of risk. The GT Capital Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  64,500  in GT Capital Holdings on September 5, 2024 and sell it today you would earn a total of  1,400  from holding GT Capital Holdings or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Globe Telecom  vs.  GT Capital Holdings

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.

GT Capital Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GT Capital Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, GT Capital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Globe Telecom and GT Capital

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

The idea behind Globe Telecom and GT Capital Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.