Correlation Between San Miguel and DMCI Holdings

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

By analyzing existing cross correlation between San Miguel and DMCI Holdings ADR, you can compare the effects of market volatilities on San Miguel and DMCI Holdings 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 DMCI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Miguel and DMCI Holdings.

Diversification Opportunities for San Miguel and DMCI Holdings

0.18

Correlation Coefficient

San Miguel  DMCI Holdings

Average diversification

The 3 months correlation between San and DMCI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel and DMCI Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings ADR 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 are associated (or correlated) with DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings ADR has no effect on the direction of San Miguel i.e., San Miguel and DMCI Holdings go up and down completely randomly.

Pair Corralation between San Miguel and DMCI Holdings

Assuming the 90 days horizon San Miguel is expected to generate 2.8 times more return on investment than DMCI Holdings. However, San Miguel is 2.8 times more volatile than DMCI Holdings ADR. It trades about 0.01 of its potential returns per unit of risk. DMCI Holdings ADR is currently generating about -0.03 per unit of risk. If you would invest  176.00  in San Miguel on September 1, 2024 and sell it today you would lose (14.00) from holding San Miguel or give up 7.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.54%
Values	Daily Returns

San Miguel  vs.  DMCI Holdings ADR

San Miguel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in San Miguel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, San Miguel reported solid returns over the last few months and may actually be approaching a breakup point.

DMCI Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DMCI Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, DMCI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with San Miguel and DMCI Holdings

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

The idea behind San Miguel and DMCI Holdings ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.