Correlation Between Rizal Commercial and SM Investments
Can any of the company-specific risk be diversified away by investing in both Rizal Commercial 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 Rizal Commercial and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rizal Commercial Banking and SM Investments Corp, you can compare the effects of market volatilities on Rizal Commercial 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 Rizal Commercial with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rizal Commercial and SM Investments.
Diversification Opportunities for Rizal Commercial and SM Investments
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rizal and SM Investments is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rizal Commercial Banking 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 Rizal Commercial 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 Rizal Commercial Banking 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 Rizal Commercial i.e., Rizal Commercial and SM Investments go up and down completely randomly.
Pair Corralation between Rizal Commercial and SM Investments
Assuming the 90 days trading horizon Rizal Commercial Banking is expected to under-perform the SM Investments. In addition to that, Rizal Commercial is 1.89 times more volatile than SM Investments Corp. It trades about -0.06 of its total potential returns per unit of risk. SM Investments Corp is currently generating about -0.09 per unit of volatility. If you would invest 88,200 in SM Investments Corp on October 26, 2024 and sell it today you would lose (2,200) from holding SM Investments Corp or give up 2.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.89% |
| Values | Daily Returns |
Rizal Commercial Banking vs. SM Investments Corp
Performance |
| Timeline |
| Rizal Commercial Banking |
| SM Investments Corp |
Rizal Commercial and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rizal Commercial and SM Investments
The main advantage of trading using opposite Rizal Commercial and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rizal Commercial 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.| Rizal Commercial vs. Allhome Corp | Rizal Commercial vs. BDO Unibank | Rizal Commercial vs. Cebu Air Preferred | Rizal Commercial vs. Philippine Business Bank |
| SM Investments vs. Lepanto Consolidated Mining | SM Investments vs. Rizal Commercial Banking | SM Investments vs. Philippine Business Bank | SM Investments vs. National Reinsurance |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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