Correlation Between Asia United and SM Investments
Can any of the company-specific risk be diversified away by investing in both Asia United and SM Investments 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 Asia United and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia United Bank and SM Investments Corp, you can compare the effects of market volatilities on Asia United and SM Investments 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 Asia United with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia United and SM Investments.
Diversification Opportunities for Asia United and SM Investments
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Asia and SM Investments is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Asia United Bank and SM Investments Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments Corp and Asia United 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 Asia United Bank are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments Corp has no effect on the direction of Asia United i.e., Asia United and SM Investments go up and down completely randomly.
Pair Corralation between Asia United and SM Investments
Assuming the 90 days trading horizon Asia United Bank is expected to generate 0.71 times more return on investment than SM Investments. However, Asia United Bank is 1.4 times less risky than SM Investments. It trades about 0.06 of its potential returns per unit of risk. SM Investments Corp is currently generating about -0.13 per unit of risk. If you would invest 6,100 in Asia United Bank on August 25, 2024 and sell it today you would earn a total of 130.00 from holding Asia United Bank or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asia United Bank vs. SM Investments Corp
Performance |
| Timeline |
| Asia United Bank |
| SM Investments Corp |
Asia United and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia United and SM Investments
The main advantage of trading using opposite Asia United and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia United position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.| Asia United vs. Atlas Consolidated Mining | Asia United vs. Lepanto Consolidated Mining | Asia United vs. Crown Asia Chemicals | Asia United vs. Converge Information Communications |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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