Correlation Between Cebu Air and SM Investments
Can any of the company-specific risk be diversified away by investing in both Cebu Air 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 Cebu Air and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cebu Air and SM Investments Corp, you can compare the effects of market volatilities on Cebu Air 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 Cebu Air with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and SM Investments.
Diversification Opportunities for Cebu Air and SM Investments
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cebu and SM Investments is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air 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 Cebu Air 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 Cebu Air 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 Cebu Air i.e., Cebu Air and SM Investments go up and down completely randomly.
Pair Corralation between Cebu Air and SM Investments
Assuming the 90 days trading horizon Cebu Air is expected to under-perform the SM Investments. But the stock apears to be less risky and, when comparing its historical volatility, Cebu Air is 1.31 times less risky than SM Investments. The stock trades about -0.25 of its potential returns per unit of risk. The SM Investments Corp is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 96,400 in SM Investments Corp on August 28, 2024 and sell it today you would lose (6,300) from holding SM Investments Corp or give up 6.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Cebu Air vs. SM Investments Corp
Performance |
| Timeline |
| Cebu Air |
| SM Investments Corp |
Cebu Air and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and SM Investments
The main advantage of trading using opposite Cebu Air and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air 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.| Cebu Air vs. Prime Media Holdings | Cebu Air vs. Premiere Entertainment | Cebu Air vs. Figaro Coffee Group | Cebu Air vs. Suntrust Home Developers |
| SM Investments vs. Lepanto Consolidated Mining | SM Investments vs. Alliance Select Foods | SM Investments vs. Atlas Consolidated Mining | SM Investments vs. Globe Telecom |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |