Correlation Between San Miguel and SM Investments

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

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

Diversification Opportunities for San Miguel and SM Investments

0.14

Correlation Coefficient

San Miguel  SM Investments

Average diversification

The 3 months correlation between San and SM Investments is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel Corp 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 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 Corp 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 San Miguel i.e., San Miguel and SM Investments go up and down completely randomly.

Pair Corralation between San Miguel and SM Investments

Assuming the 90 days trading horizon San Miguel Corp is expected to generate 0.82 times more return on investment than SM Investments. However, San Miguel Corp is 1.22 times less risky than SM Investments. It trades about 0.06 of its potential returns per unit of risk. SM Investments Corp is currently generating about -0.09 per unit of risk. If you would invest  6,828  in San Miguel Corp on October 25, 2024 and sell it today you would earn a total of  272.00  from holding San Miguel Corp or generate 3.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.31%
Values	Daily Returns

San Miguel Corp  vs.  SM Investments Corp

San Miguel Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in San Miguel Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, San Miguel is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

SM Investments Corp

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

Pair Trading with San Miguel and SM Investments

The main advantage of trading using opposite San Miguel and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Miguel 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 San Miguel Corp and SM Investments 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.