Correlation Between Aboitiz Equity and SM Investments

Can any of the company-specific risk be diversified away by investing in both Aboitiz Equity and SM Investments 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 Aboitiz Equity and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aboitiz Equity Ventures and SM Investments Corp, you can compare the effects of market volatilities on Aboitiz Equity and SM Investments 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 Aboitiz Equity with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aboitiz Equity and SM Investments.

Diversification Opportunities for Aboitiz Equity and SM Investments

0.87

Correlation Coefficient

Aboitiz Equity  SM Investments

Very poor diversification

The 3 months correlation between Aboitiz and SM Investments is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aboitiz Equity Ventures and SM Investments Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments Corp and Aboitiz Equity 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 Aboitiz Equity Ventures are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments Corp has no effect on the direction of Aboitiz Equity i.e., Aboitiz Equity and SM Investments go up and down completely randomly.

Pair Corralation between Aboitiz Equity and SM Investments

Assuming the 90 days trading horizon Aboitiz Equity Ventures is expected to under-perform the SM Investments. But the stock apears to be less risky and, when comparing its historical volatility, Aboitiz Equity Ventures is 1.17 times less risky than SM Investments. The stock trades about -0.06 of its potential returns per unit of risk. The SM Investments Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  88,300  in SM Investments Corp on September 23, 2024 and sell it today you would earn a total of  0.00  from holding SM Investments Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Aboitiz Equity Ventures  vs.  SM Investments Corp

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Equity Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SM Investments Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Investments Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aboitiz Equity and SM Investments

The main advantage of trading using opposite Aboitiz Equity and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aboitiz Equity position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.

The idea behind Aboitiz Equity Ventures and SM Investments Corp 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.