Correlation Between BDO Unibank and SM Prime

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

By analyzing existing cross correlation between BDO Unibank and SM Prime Holdings, you can compare the effects of market volatilities on BDO Unibank and SM Prime 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 BDO Unibank with a short position of SM Prime. Check out your portfolio center. Please also check ongoing floating volatility patterns of BDO Unibank and SM Prime.

Diversification Opportunities for BDO Unibank and SM Prime

0.77

Correlation Coefficient

BDO Unibank  SM Prime

Poor diversification

The 3 months correlation between BDO and SMPH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BDO Unibank and SM Prime Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Prime Holdings and BDO Unibank 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 BDO Unibank are associated (or correlated) with SM Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Prime Holdings has no effect on the direction of BDO Unibank i.e., BDO Unibank and SM Prime go up and down completely randomly.

Pair Corralation between BDO Unibank and SM Prime

Assuming the 90 days trading horizon BDO Unibank is expected to generate 0.92 times more return on investment than SM Prime. However, BDO Unibank is 1.09 times less risky than SM Prime. It trades about 0.03 of its potential returns per unit of risk. SM Prime Holdings is currently generating about -0.09 per unit of risk. If you would invest  15,202  in BDO Unibank on September 4, 2024 and sell it today you would earn a total of  318.00  from holding BDO Unibank or generate 2.09% return on investment over 90 days.

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

BDO Unibank  vs.  SM Prime Holdings

BDO Unibank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BDO Unibank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, BDO Unibank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SM Prime Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Prime Holdings 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BDO Unibank and SM Prime

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

The idea behind BDO Unibank and SM Prime Holdings 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.