Correlation Between SM Prime and Lai Sun

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

Diversification Opportunities for SM Prime and Lai Sun

1.0

Correlation Coefficient

SM Prime  Lai Sun

No risk reduction

The 3 months correlation between SPHXF and Lai is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SM Prime Holdings and Lai Sun Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lai Sun Development 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 Lai Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lai Sun Development has no effect on the direction of SM Prime i.e., SM Prime and Lai Sun go up and down completely randomly.

Pair Corralation between SM Prime and Lai Sun

If you would invest  11.00  in Lai Sun Development on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Lai Sun Development or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.12%
Values	Daily Returns

SM Prime Holdings  vs.  Lai Sun Development

SM Prime Holdings

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, SM Prime is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lai Sun Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lai Sun Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Lai Sun is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SM Prime and Lai Sun

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

The idea behind SM Prime Holdings and Lai Sun 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.