Correlation Between SM Investments and Launch One

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

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

Diversification Opportunities for SM Investments and Launch One

0.07

Correlation Coefficient

SM Investments  Launch One

Significant diversification

The 3 months correlation between SVTMF and Launch is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Launch One Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch One Acquisition and SM Investments 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 Investments are associated (or correlated) with Launch One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch One Acquisition has no effect on the direction of SM Investments i.e., SM Investments and Launch One go up and down completely randomly.

Pair Corralation between SM Investments and Launch One

Assuming the 90 days horizon SM Investments is expected to under-perform the Launch One. In addition to that, SM Investments is 11.9 times more volatile than Launch One Acquisition. It trades about -0.19 of its total potential returns per unit of risk. Launch One Acquisition is currently generating about 0.22 per unit of volatility. If you would invest  1,003  in Launch One Acquisition on December 20, 2024 and sell it today you would earn a total of  17.00  from holding Launch One Acquisition or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

SM Investments  vs.  Launch One Acquisition

SM Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary 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.

Launch One Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One 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 Investments and Launch One

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

The idea behind SM Investments and Launch One Acquisition 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 Global Correlations module to find global opportunities by holding instruments from different markets.