Correlation Between SM Investments and Metropolitan Bank
Can any of the company-specific risk be diversified away by investing in both SM Investments and Metropolitan Bank 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 Metropolitan Bank 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 Metropolitan Bank Trust, you can compare the effects of market volatilities on SM Investments and Metropolitan Bank 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 Metropolitan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Metropolitan Bank.
Diversification Opportunities for SM Investments and Metropolitan Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SM Investments and Metropolitan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Metropolitan Bank Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Trust 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 Metropolitan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Bank Trust has no effect on the direction of SM Investments i.e., SM Investments and Metropolitan Bank go up and down completely randomly.
Pair Corralation between SM Investments and Metropolitan Bank
Assuming the 90 days trading horizon SM Investments is expected to generate 11.87 times less return on investment than Metropolitan Bank. But when comparing it to its historical volatility, SM Investments Corp is 1.19 times less risky than Metropolitan Bank. It trades about 0.01 of its potential returns per unit of risk. Metropolitan Bank Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,683 in Metropolitan Bank Trust on August 29, 2024 and sell it today you would earn a total of 2,082 from holding Metropolitan Bank Trust or generate 36.64% 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. Metropolitan Bank Trust
Performance |
| Timeline |
| SM Investments Corp |
| Metropolitan Bank Trust |
SM Investments and Metropolitan Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Metropolitan Bank
The main advantage of trading using opposite SM Investments and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Metropolitan Bank 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 Metropolitan Bank will offset losses from the drop in Metropolitan Bank's long position.| SM Investments vs. Lepanto Consolidated Mining | SM Investments vs. Alliance Select Foods | SM Investments vs. Atlas Consolidated Mining | SM Investments vs. Globe Telecom |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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