Correlation Between National Reinsurance and BDO Unibank

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

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

Diversification Opportunities for National Reinsurance and BDO Unibank

0.34

Correlation Coefficient

National Reinsurance  BDO Unibank

Weak diversification

The 3 months correlation between National and BDO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and BDO Unibank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BDO Unibank 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 BDO Unibank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BDO Unibank has no effect on the direction of National Reinsurance i.e., National Reinsurance and BDO Unibank go up and down completely randomly.

Pair Corralation between National Reinsurance and BDO Unibank

Assuming the 90 days trading horizon National Reinsurance is expected to generate 3.95 times more return on investment than BDO Unibank. However, National Reinsurance is 3.95 times more volatile than BDO Unibank. It trades about 0.04 of its potential returns per unit of risk. BDO Unibank is currently generating about 0.05 per unit of risk. If you would invest  58.00  in National Reinsurance on September 24, 2024 and sell it today you would earn a total of  11.00  from holding National Reinsurance or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.0%
Values	Daily Returns

National Reinsurance  vs.  BDO Unibank

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.

BDO Unibank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Reinsurance and BDO Unibank

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

The idea behind National Reinsurance and BDO Unibank 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.