Correlation Between SM Investments and Megawide Construction

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

Diversification Opportunities for SM Investments and Megawide Construction

0.2

Correlation Coefficient

SM Investments  Megawide Construction

Modest diversification

The 3 months correlation between SM Investments and Megawide is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Megawide Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megawide Construction 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 Megawide Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megawide Construction has no effect on the direction of SM Investments i.e., SM Investments and Megawide Construction go up and down completely randomly.

Pair Corralation between SM Investments and Megawide Construction

Assuming the 90 days trading horizon SM Investments Corp is expected to under-perform the Megawide Construction. In addition to that, SM Investments is 1.84 times more volatile than Megawide Construction Corp. It trades about -0.01 of its total potential returns per unit of risk. Megawide Construction Corp is currently generating about 0.03 per unit of volatility. If you would invest  9,901  in Megawide Construction Corp on April 25, 2025 and sell it today you would earn a total of  99.00  from holding Megawide Construction Corp or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

SM Investments Corp  vs.  Megawide Construction Corp

SM Investments Corp

Risk-Adjusted Performance

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 rather sound basic indicators, SM Investments is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Megawide Construction

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Megawide Construction Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Megawide Construction is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SM Investments and Megawide Construction

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

The idea behind SM Investments Corp and Megawide Construction Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.