Correlation Between San Miguel and Liberty Flour

Can any of the company-specific risk be diversified away by investing in both San Miguel and Liberty Flour 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 San Miguel and Liberty Flour into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Miguel Pure and Liberty Flour Mills, you can compare the effects of market volatilities on San Miguel and Liberty Flour 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 San Miguel with a short position of Liberty Flour. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Miguel and Liberty Flour.

Diversification Opportunities for San Miguel and Liberty Flour

-0.29

Correlation Coefficient

San Miguel  Liberty Flour

Very good diversification

The 3 months correlation between San and Liberty is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel Pure and Liberty Flour Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Flour Mills and San Miguel 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 San Miguel Pure are associated (or correlated) with Liberty Flour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Flour Mills has no effect on the direction of San Miguel i.e., San Miguel and Liberty Flour go up and down completely randomly.

Pair Corralation between San Miguel and Liberty Flour

Assuming the 90 days trading horizon San Miguel Pure is expected to under-perform the Liberty Flour. But the stock apears to be less risky and, when comparing its historical volatility, San Miguel Pure is 5.39 times less risky than Liberty Flour. The stock trades about 0.0 of its potential returns per unit of risk. The Liberty Flour Mills is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,432  in Liberty Flour Mills on October 9, 2024 and sell it today you would earn a total of  568.00  from holding Liberty Flour Mills or generate 39.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.79%
Values	Daily Returns

San Miguel Pure  vs.  Liberty Flour Mills

San Miguel Pure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Miguel Pure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, San Miguel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Liberty Flour Mills

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Flour Mills are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Liberty Flour exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with San Miguel and Liberty Flour

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

The idea behind San Miguel Pure and Liberty Flour Mills 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.