Correlation Between Merchants National and SM Prime

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

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

Diversification Opportunities for Merchants National and SM Prime

-0.42

Correlation Coefficient

Merchants National  SM Prime

Very good diversification

The 3 months correlation between Merchants and SPHXF is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merchants National Properties 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 Merchants National 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 Merchants National Properties 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 Merchants National i.e., Merchants National and SM Prime go up and down completely randomly.

Pair Corralation between Merchants National and SM Prime

Given the investment horizon of 90 days Merchants National Properties is expected to generate 0.02 times more return on investment than SM Prime. However, Merchants National Properties is 63.09 times less risky than SM Prime. It trades about -0.07 of its potential returns per unit of risk. SM Prime Holdings is currently generating about -0.12 per unit of risk. If you would invest  200,000  in Merchants National Properties on May 5, 2025 and sell it today you would lose (15,000) from holding Merchants National Properties or give up 7.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Merchants National Properties  vs.  SM Prime Holdings

Merchants National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants National Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merchants National and SM Prime

The main advantage of trading using opposite Merchants National and SM Prime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants National 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 Merchants National Properties 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 Transaction History module to view history of all your transactions and understand their impact on performance.