Correlation Between SM Investments and Rizal Commercial
Can any of the company-specific risk be diversified away by investing in both SM Investments and Rizal Commercial 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 Rizal Commercial 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 Rizal Commercial Banking, you can compare the effects of market volatilities on SM Investments and Rizal Commercial 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 Rizal Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Rizal Commercial.
Diversification Opportunities for SM Investments and Rizal Commercial
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Investments and Rizal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Rizal Commercial Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rizal Commercial Banking 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 Rizal Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rizal Commercial Banking has no effect on the direction of SM Investments i.e., SM Investments and Rizal Commercial go up and down completely randomly.
Pair Corralation between SM Investments and Rizal Commercial
Assuming the 90 days trading horizon SM Investments is expected to generate 2.9 times less return on investment than Rizal Commercial. But when comparing it to its historical volatility, SM Investments Corp is 1.34 times less risky than Rizal Commercial. It trades about 0.01 of its potential returns per unit of risk. Rizal Commercial Banking is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,284 in Rizal Commercial Banking on August 29, 2024 and sell it today you would earn a total of 31.00 from holding Rizal Commercial Banking or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.6% |
| Values | Daily Returns |
SM Investments Corp vs. Rizal Commercial Banking
Performance |
| Timeline |
| SM Investments Corp |
| Rizal Commercial Banking |
SM Investments and Rizal Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Investments and Rizal Commercial
The main advantage of trading using opposite SM Investments and Rizal Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments position performs unexpectedly, Rizal Commercial 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 Rizal Commercial will offset losses from the drop in Rizal Commercial'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 |
| Rizal Commercial vs. Allhome Corp | Rizal Commercial vs. Jollibee Foods Corp | Rizal Commercial vs. LFM Properties Corp | Rizal Commercial vs. PXP Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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