Correlation Between SM Investments and Globe Telecom
Can any of the company-specific risk be diversified away by investing in both SM Investments and Globe Telecom 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 Globe Telecom 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 Globe Telecom, you can compare the effects of market volatilities on SM Investments and Globe Telecom 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 Globe Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Globe Telecom.
Diversification Opportunities for SM Investments and Globe Telecom
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SM Investments and Globe is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Globe Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Telecom 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 Globe Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Telecom has no effect on the direction of SM Investments i.e., SM Investments and Globe Telecom go up and down completely randomly.
Pair Corralation between SM Investments and Globe Telecom
Assuming the 90 days trading horizon SM Investments is expected to generate 12.68 times less return on investment than Globe Telecom. In addition to that, SM Investments is 1.12 times more volatile than Globe Telecom. It trades about 0.0 of its total potential returns per unit of risk. Globe Telecom is currently generating about 0.06 per unit of volatility. If you would invest 156,068 in Globe Telecom on August 26, 2024 and sell it today you would earn a total of 53,932 from holding Globe Telecom or generate 34.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Investments Corp vs. Globe Telecom
Performance |
| Timeline |
| SM Investments Corp |
| Globe Telecom |
SM Investments and Globe Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Globe Telecom
The main advantage of trading using opposite SM Investments and Globe Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Globe Telecom 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 Globe Telecom will offset losses from the drop in Globe Telecom's long position.The idea behind SM Investments Corp and Globe Telecom pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Globe Telecom vs. PLDT Inc | Globe Telecom vs. Allhome Corp | Globe Telecom vs. Jollibee Foods Corp | Globe Telecom 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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