Correlation Between National Reinsurance and Ayala Corp

Can any of the company-specific risk be diversified away by investing in both National Reinsurance and Ayala Corp 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 National Reinsurance and Ayala Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Reinsurance and Ayala Corp, you can compare the effects of market volatilities on National Reinsurance and Ayala Corp 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 National Reinsurance with a short position of Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Reinsurance and Ayala Corp.

Diversification Opportunities for National Reinsurance and Ayala Corp

0.72

Correlation Coefficient

National Reinsurance  Ayala Corp

Poor diversification

The 3 months correlation between National and Ayala is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Ayala Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp and National Reinsurance 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 National Reinsurance are associated (or correlated) with Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp has no effect on the direction of National Reinsurance i.e., National Reinsurance and Ayala Corp go up and down completely randomly.

Pair Corralation between National Reinsurance and Ayala Corp

Assuming the 90 days trading horizon National Reinsurance is expected to under-perform the Ayala Corp. In addition to that, National Reinsurance is 2.25 times more volatile than Ayala Corp. It trades about -0.01 of its total potential returns per unit of risk. Ayala Corp is currently generating about 0.04 per unit of volatility. If you would invest  61,600  in Ayala Corp on September 12, 2024 and sell it today you would earn a total of  2,250  from holding Ayala Corp or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

National Reinsurance  vs.  Ayala Corp

National Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Reinsurance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ayala Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ayala Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ayala Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Reinsurance and Ayala Corp

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

The idea behind National Reinsurance and Ayala Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.