Correlation Between SM Prime and Daito Trust

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

By analyzing existing cross correlation between SM Prime Holdings and Daito Trust Construction, you can compare the effects of market volatilities on SM Prime and Daito Trust 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 Prime with a short position of Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Prime and Daito Trust.

Diversification Opportunities for SM Prime and Daito Trust

0.18

Correlation Coefficient

SM Prime  Daito Trust

Average diversification

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

Pair Corralation between SM Prime and Daito Trust

Assuming the 90 days horizon SM Prime Holdings is expected to under-perform the Daito Trust. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Prime Holdings is 1.09 times less risky than Daito Trust. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Daito Trust Construction is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,755  in Daito Trust Construction on December 20, 2024 and sell it today you would lose (177.00) from holding Daito Trust Construction or give up 6.42% of portfolio value over 90 days.

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

SM Prime Holdings  vs.  Daito Trust Construction

SM Prime Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Prime Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Daito Trust Construction

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SM Prime and Daito Trust

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

The idea behind SM Prime Holdings and Daito Trust Construction 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.