Correlation Between SM Prime and Henderson Land

Can any of the company-specific risk be diversified away by investing in both SM Prime and Henderson Land 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 Henderson Land 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 Henderson Land Development, you can compare the effects of market volatilities on SM Prime and Henderson Land 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 Henderson Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Prime and Henderson Land.

Diversification Opportunities for SM Prime and Henderson Land

-0.32

Correlation Coefficient

SM Prime  Henderson Land

Very good diversification

The 3 months correlation between SPHXF and Henderson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SM Prime Holdings and Henderson Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Land Devel 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 Henderson Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Land Devel has no effect on the direction of SM Prime i.e., SM Prime and Henderson Land go up and down completely randomly.

Pair Corralation between SM Prime and Henderson Land

Assuming the 90 days horizon SM Prime Holdings is expected to under-perform the Henderson Land. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Prime Holdings is 1.16 times less risky than Henderson Land. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Henderson Land Development is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Henderson Land Development on December 30, 2024 and sell it today you would lose (22.00) from holding Henderson Land Development or give up 7.33% of portfolio value over 90 days.

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

SM Prime Holdings  vs.  Henderson Land Development

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 latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Henderson Land Devel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Henderson Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SM Prime and Henderson Land

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

The idea behind SM Prime Holdings and Henderson Land Development 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..