Correlation Between SM Investments and Philippine Savings
Can any of the company-specific risk be diversified away by investing in both SM Investments and Philippine Savings 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 Savings 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 Savings Bank, you can compare the effects of market volatilities on SM Investments and Philippine Savings 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 Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Philippine Savings.
Diversification Opportunities for SM Investments and Philippine Savings
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SM Investments and Philippine is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Philippine Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Savings 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 Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Savings Bank has no effect on the direction of SM Investments i.e., SM Investments and Philippine Savings go up and down completely randomly.
Pair Corralation between SM Investments and Philippine Savings
Assuming the 90 days trading horizon SM Investments is expected to generate 7.12 times less return on investment than Philippine Savings. But when comparing it to its historical volatility, SM Investments Corp is 1.2 times less risky than Philippine Savings. It trades about 0.01 of its potential returns per unit of risk. Philippine Savings Bank is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,151 in Philippine Savings Bank on August 29, 2024 and sell it today you would earn a total of 849.00 from holding Philippine Savings Bank or generate 16.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.99% |
| Values | Daily Returns |
SM Investments Corp vs. Philippine Savings Bank
Performance |
| Timeline |
| SM Investments Corp |
| Philippine Savings Bank |
SM Investments and Philippine Savings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Philippine Savings
The main advantage of trading using opposite SM Investments and Philippine Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Philippine Savings 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 Savings will offset losses from the drop in Philippine Savings' 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 |
| Philippine Savings vs. Allhome Corp | Philippine Savings vs. Semirara Mining Corp | Philippine Savings vs. SM Investments Corp | Philippine Savings vs. Top Frontier Investment |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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