Correlation Between SM Investments and Cebu Air
Can any of the company-specific risk be diversified away by investing in both SM Investments and Cebu Air 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 SM Investments and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Investments Corp and Cebu Air, you can compare the effects of market volatilities on SM Investments and Cebu Air 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 SM Investments with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Cebu Air.
Diversification Opportunities for SM Investments and Cebu Air
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SM Investments and Cebu is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and SM Investments 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 SM Investments Corp are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air has no effect on the direction of SM Investments i.e., SM Investments and Cebu Air go up and down completely randomly.
Pair Corralation between SM Investments and Cebu Air
Assuming the 90 days trading horizon SM Investments Corp is expected to under-perform the Cebu Air. In addition to that, SM Investments is 1.16 times more volatile than Cebu Air. It trades about -0.09 of its total potential returns per unit of risk. Cebu Air is currently generating about -0.02 per unit of volatility. If you would invest 2,805 in Cebu Air on October 26, 2024 and sell it today you would lose (20.00) from holding Cebu Air or give up 0.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
SM Investments Corp vs. Cebu Air
Performance |
| Timeline |
| SM Investments Corp |
| Cebu Air |
SM Investments and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Cebu Air
The main advantage of trading using opposite SM Investments and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| SM Investments vs. Lepanto Consolidated Mining | SM Investments vs. Rizal Commercial Banking | SM Investments vs. Philippine Business Bank | SM Investments vs. National Reinsurance |
| Cebu Air vs. Semirara Mining Corp | Cebu Air vs. National Reinsurance | Cebu Air vs. Lepanto Consolidated Mining | Cebu Air vs. Apex Mining Co |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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