Correlation Between SM Investments and Philippine Business
Can any of the company-specific risk be diversified away by investing in both SM Investments and Philippine Business 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 Philippine Business 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 Philippine Business Bank, you can compare the effects of market volatilities on SM Investments and Philippine Business 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 Philippine Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Philippine Business.
Diversification Opportunities for SM Investments and Philippine Business
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SM Investments and Philippine is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Philippine Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Business Bank 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 Philippine Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Business Bank has no effect on the direction of SM Investments i.e., SM Investments and Philippine Business go up and down completely randomly.
Pair Corralation between SM Investments and Philippine Business
Assuming the 90 days trading horizon SM Investments is expected to generate 4.09 times less return on investment than Philippine Business. But when comparing it to its historical volatility, SM Investments Corp is 1.7 times less risky than Philippine Business. It trades about 0.01 of its potential returns per unit of risk. Philippine Business Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 910.00 in Philippine Business Bank on August 27, 2024 and sell it today you would earn a total of 6.00 from holding Philippine Business Bank or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.18% |
| Values | Daily Returns |
SM Investments Corp vs. Philippine Business Bank
Performance |
| Timeline |
| SM Investments Corp |
| Philippine Business Bank |
SM Investments and Philippine Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Philippine Business
The main advantage of trading using opposite SM Investments and Philippine Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Philippine Business 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 Philippine Business will offset losses from the drop in Philippine Business' long position.| SM Investments vs. Apex Mining Co | SM Investments vs. Transpacific Broadband Group | SM Investments vs. Manila Mining Corp | SM Investments vs. Premiere Entertainment |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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