Correlation Between El Puerto and SM Investments

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

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

Diversification Opportunities for El Puerto and SM Investments

-0.46

Correlation Coefficient

El Puerto  SM Investments

Very good diversification

The 3 months correlation between ELPQF and SVTMF is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and El Puerto 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 El Puerto de 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 has no effect on the direction of El Puerto i.e., El Puerto and SM Investments go up and down completely randomly.

Pair Corralation between El Puerto and SM Investments

Assuming the 90 days horizon El Puerto de is expected to generate 1.66 times more return on investment than SM Investments. However, El Puerto is 1.66 times more volatile than SM Investments. It trades about 0.01 of its potential returns per unit of risk. SM Investments is currently generating about 0.01 per unit of risk. If you would invest  515.00  in El Puerto de on October 5, 2024 and sell it today you would lose (22.00) from holding El Puerto de or give up 4.27% of portfolio value over 90 days.

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

El Puerto de  vs.  SM Investments

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SM Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, SM Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Puerto and SM Investments

The main advantage of trading using opposite El Puerto and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Puerto 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 El Puerto de and SM Investments 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.