Correlation Between PLDT and SM Prime

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

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

Diversification Opportunities for PLDT and SM Prime

-0.17

Correlation Coefficient

PLDT  SM Prime

Good diversification

The 3 months correlation between PLDT and SMPH is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc and SM Prime Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Prime Holdings and PLDT 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 PLDT Inc are associated (or correlated) with SM Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Prime Holdings has no effect on the direction of PLDT i.e., PLDT and SM Prime go up and down completely randomly.

Pair Corralation between PLDT and SM Prime

Assuming the 90 days trading horizon PLDT Inc is expected to generate 0.51 times more return on investment than SM Prime. However, PLDT Inc is 1.97 times less risky than SM Prime. It trades about 0.04 of its potential returns per unit of risk. SM Prime Holdings is currently generating about -0.06 per unit of risk. If you would invest  125,143  in PLDT Inc on December 27, 2024 and sell it today you would earn a total of  3,257  from holding PLDT Inc or generate 2.6% return on investment over 90 days.

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

PLDT Inc  vs.  SM Prime Holdings

PLDT Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PLDT Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PLDT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PLDT and SM Prime

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

The idea behind PLDT Inc and SM Prime Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.