Correlation Between DMCI Holdings and SM Investments

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

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

Diversification Opportunities for DMCI Holdings and SM Investments

-0.68

Correlation Coefficient

DMCI Holdings  SM Investments

Excellent diversification

The 3 months correlation between DMCI and SM Investments is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding DMCI Holdings 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 DMCI Holdings 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 DMCI Holdings 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 DMCI Holdings i.e., DMCI Holdings and SM Investments go up and down completely randomly.

Pair Corralation between DMCI Holdings and SM Investments

Assuming the 90 days trading horizon DMCI Holdings is expected to generate 0.68 times more return on investment than SM Investments. However, DMCI Holdings is 1.47 times less risky than SM Investments. It trades about 0.05 of its potential returns per unit of risk. SM Investments Corp is currently generating about -0.07 per unit of risk. If you would invest  1,096  in DMCI Holdings on December 4, 2024 and sell it today you would earn a total of  36.00  from holding DMCI Holdings or generate 3.28% return on investment over 90 days.

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

DMCI Holdings  vs.  SM Investments Corp

DMCI Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DMCI Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, DMCI Holdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SM Investments Corp

Risk-Adjusted Performance

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 DMCI Holdings and SM Investments

The main advantage of trading using opposite DMCI Holdings and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMCI Holdings 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 DMCI Holdings 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.