Correlation Between Emperador and SM Investments
Can any of the company-specific risk be diversified away by investing in both Emperador 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 Emperador and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emperador and SM Investments Corp, you can compare the effects of market volatilities on Emperador 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 Emperador with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emperador and SM Investments.
Diversification Opportunities for Emperador and SM Investments
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emperador and SM Investments is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Emperador 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 Emperador 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 Emperador 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 Emperador i.e., Emperador and SM Investments go up and down completely randomly.
Pair Corralation between Emperador and SM Investments
Assuming the 90 days trading horizon Emperador is expected to under-perform the SM Investments. But the stock apears to be less risky and, when comparing its historical volatility, Emperador is 2.08 times less risky than SM Investments. The stock trades about -0.04 of its potential returns per unit of risk. The SM Investments Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 91,370 in SM Investments Corp on September 14, 2024 and sell it today you would lose (1,070) from holding SM Investments Corp or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Emperador vs. SM Investments Corp
Performance |
| Timeline |
| Emperador |
| SM Investments Corp |
Emperador and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emperador and SM Investments
The main advantage of trading using opposite Emperador and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emperador 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.| Emperador vs. Semirara Mining Corp | Emperador vs. Alliance Select Foods | Emperador vs. Atlas Consolidated Mining | Emperador vs. Philex Mining Corp |
| SM Investments vs. Apex Mining Co | SM Investments vs. Metro Retail Stores | SM Investments vs. Cebu Air Preferred | SM Investments vs. Concepcion Industrial Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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