Correlation Between Lepanto Consolidated and San Miguel

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

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

Diversification Opportunities for Lepanto Consolidated and San Miguel

-0.41

Correlation Coefficient

Lepanto Consolidated  San Miguel

Very good diversification

The 3 months correlation between Lepanto and San is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and San Miguel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Miguel Corp and Lepanto Consolidated 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 Lepanto Consolidated Mining are associated (or correlated) with San Miguel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Miguel Corp has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and San Miguel go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and San Miguel

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to generate 1.13 times more return on investment than San Miguel. However, Lepanto Consolidated is 1.13 times more volatile than San Miguel Corp. It trades about 0.14 of its potential returns per unit of risk. San Miguel Corp is currently generating about 0.13 per unit of risk. If you would invest  6.40  in Lepanto Consolidated Mining on October 11, 2024 and sell it today you would earn a total of  0.40  from holding Lepanto Consolidated Mining or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.24%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  San Miguel Corp

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

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

San Miguel Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in San Miguel Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, San Miguel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lepanto Consolidated and San Miguel

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

The idea behind Lepanto Consolidated Mining and San Miguel 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.