Correlation Between SM Investments and EEI Corp
Can any of the company-specific risk be diversified away by investing in both SM Investments and EEI Corp 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 EEI Corp 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 EEI Corp, you can compare the effects of market volatilities on SM Investments and EEI Corp 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 EEI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and EEI Corp.
Diversification Opportunities for SM Investments and EEI Corp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SM Investments and EEI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and EEI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EEI Corp 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 EEI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EEI Corp has no effect on the direction of SM Investments i.e., SM Investments and EEI Corp go up and down completely randomly.
Pair Corralation between SM Investments and EEI Corp
Assuming the 90 days trading horizon SM Investments is expected to generate 10.0 times less return on investment than EEI Corp. But when comparing it to its historical volatility, SM Investments Corp is 1.96 times less risky than EEI Corp. It trades about 0.01 of its potential returns per unit of risk. EEI Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 285.00 in EEI Corp on September 14, 2024 and sell it today you would earn a total of 75.00 from holding EEI Corp or generate 26.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
SM Investments Corp vs. EEI Corp
Performance |
| Timeline |
| SM Investments Corp |
| EEI Corp |
SM Investments and EEI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and EEI Corp
The main advantage of trading using opposite SM Investments and EEI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, EEI Corp 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 EEI Corp will offset losses from the drop in EEI Corp's long position.| SM Investments vs. Apex Mining Co | SM Investments vs. Metro Retail Stores | SM Investments vs. Cebu Air Preferred | SM Investments vs. Concepcion Industrial Corp |
| EEI Corp vs. Philex Mining Corp | EEI Corp vs. National Reinsurance | EEI Corp vs. Rizal Commercial Banking | EEI Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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