Correlation Between SM Investments and Cirtek Holdings

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

By analyzing existing cross correlation between SM Investments Corp and Cirtek Holdings Philippines, you can compare the effects of market volatilities on SM Investments and Cirtek Holdings 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 Cirtek Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Cirtek Holdings.

Diversification Opportunities for SM Investments and Cirtek Holdings

0.52

Correlation Coefficient

SM Investments  Cirtek Holdings

Very weak diversification

The 3 months correlation between SM Investments and Cirtek is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Cirtek Holdings Philippines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirtek Holdings Phil 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 Corp are associated (or correlated) with Cirtek Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirtek Holdings Phil has no effect on the direction of SM Investments i.e., SM Investments and Cirtek Holdings go up and down completely randomly.

Pair Corralation between SM Investments and Cirtek Holdings

Assuming the 90 days trading horizon SM Investments Corp is expected to generate 0.22 times more return on investment than Cirtek Holdings. However, SM Investments Corp is 4.61 times less risky than Cirtek Holdings. It trades about -0.08 of its potential returns per unit of risk. Cirtek Holdings Philippines is currently generating about -0.02 per unit of risk. If you would invest  99,500  in SM Investments Corp on September 24, 2024 and sell it today you would lose (11,200) from holding SM Investments Corp or give up 11.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.81%
Values	Daily Returns

SM Investments Corp  vs.  Cirtek Holdings Philippines

SM Investments Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Investments Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cirtek Holdings Phil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cirtek Holdings Philippines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SM Investments and Cirtek Holdings

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

The idea behind SM Investments Corp and Cirtek Holdings Philippines 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 Transaction History module to view history of all your transactions and understand their impact on performance.