Correlation Between PXP Energy and SM Investments
Can any of the company-specific risk be diversified away by investing in both PXP Energy 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 PXP Energy and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PXP Energy Corp and SM Investments Corp, you can compare the effects of market volatilities on PXP Energy 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 PXP Energy with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of PXP Energy and SM Investments.
Diversification Opportunities for PXP Energy and SM Investments
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PXP and SM Investments is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PXP Energy Corp 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 PXP Energy 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 PXP Energy Corp 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 PXP Energy i.e., PXP Energy and SM Investments go up and down completely randomly.
Pair Corralation between PXP Energy and SM Investments
Assuming the 90 days trading horizon PXP Energy Corp is expected to under-perform the SM Investments. But the stock apears to be less risky and, when comparing its historical volatility, PXP Energy Corp is 1.44 times less risky than SM Investments. The stock trades about -0.27 of its potential returns per unit of risk. The SM Investments Corp is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 94,100 in SM Investments Corp on September 1, 2024 and sell it today you would lose (6,600) from holding SM Investments Corp or give up 7.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PXP Energy Corp vs. SM Investments Corp
Performance |
| Timeline |
| PXP Energy Corp |
| SM Investments Corp |
PXP Energy and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PXP Energy and SM Investments
The main advantage of trading using opposite PXP Energy and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PXP Energy 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.| PXP Energy vs. SM Investments Corp | PXP Energy vs. San Miguel Pure | PXP Energy vs. Ayala Corp | PXP Energy vs. Ayala Land |
| SM Investments vs. GT Capital Holdings | SM Investments vs. Allhome Corp | SM Investments vs. Jollibee Foods Corp | SM Investments vs. LFM Properties 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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