Correlation Between Manila Electric and SM Investments
Can any of the company-specific risk be diversified away by investing in both Manila Electric 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 Manila Electric and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manila Electric Co and SM Investments Corp, you can compare the effects of market volatilities on Manila Electric 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 Manila Electric with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manila Electric and SM Investments.
Diversification Opportunities for Manila Electric and SM Investments
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Manila and SM Investments is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Manila Electric Co 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 Manila Electric 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 Manila Electric Co 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 Manila Electric i.e., Manila Electric and SM Investments go up and down completely randomly.
Pair Corralation between Manila Electric and SM Investments
Assuming the 90 days trading horizon Manila Electric Co is expected to under-perform the SM Investments. But the stock apears to be less risky and, when comparing its historical volatility, Manila Electric Co is 1.15 times less risky than SM Investments. The stock trades about -0.18 of its potential returns per unit of risk. The SM Investments Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 88,300 in SM Investments Corp on September 23, 2024 and sell it today you would earn a total of 0.00 from holding SM Investments Corp or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Manila Electric Co vs. SM Investments Corp
Performance |
Timeline |
Manila Electric |
SM Investments Corp |
Manila Electric and SM Investments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Manila Electric and SM Investments
The main advantage of trading using opposite Manila Electric and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manila Electric 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.Manila Electric vs. Easycall Communications Philippines | Manila Electric vs. Philippine National Bank | Manila Electric vs. Century Pacific Food | Manila Electric vs. RFM Corp |
SM Investments vs. Ayala Corp | SM Investments vs. Alliance Global Group | SM Investments vs. DMCI Holdings |
Check out your portfolio center.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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