Correlation Between SM Investments and Manila Electric

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

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

Diversification Opportunities for SM Investments and Manila Electric

-0.3

Correlation Coefficient

SM Investments  Manila Electric

Very good diversification

The 3 months correlation between SM Investments and Manila is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Manila Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manila Electric and SM Investments 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 SM Investments Corp are associated (or correlated) with Manila Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manila Electric has no effect on the direction of SM Investments i.e., SM Investments and Manila Electric go up and down completely randomly.

Pair Corralation between SM Investments and Manila Electric

Assuming the 90 days trading horizon SM Investments Corp is expected to under-perform the Manila Electric. In addition to that, SM Investments is 1.02 times more volatile than Manila Electric Co. It trades about -0.12 of its total potential returns per unit of risk. Manila Electric Co is currently generating about 0.11 per unit of volatility. If you would invest  47,367  in Manila Electric Co on December 30, 2024 and sell it today you would earn a total of  5,433  from holding Manila Electric Co or generate 11.47% return on investment over 90 days.

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

SM Investments Corp  vs.  Manila Electric Co

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Manila Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manila Electric Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Manila Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SM Investments and Manila Electric

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

The idea behind SM Investments Corp and Manila Electric Co 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.