Correlation Between SM Investments and RTG Mining

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

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

Diversification Opportunities for SM Investments and RTG Mining

0.21

Correlation Coefficient

SM Investments  RTG Mining

Modest diversification

The 3 months correlation between SVTMF and RTG is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and RTG Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTG Mining 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 RTG Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTG Mining has no effect on the direction of SM Investments i.e., SM Investments and RTG Mining go up and down completely randomly.

Pair Corralation between SM Investments and RTG Mining

Assuming the 90 days horizon SM Investments is expected to generate 0.82 times more return on investment than RTG Mining. However, SM Investments is 1.23 times less risky than RTG Mining. It trades about 0.01 of its potential returns per unit of risk. RTG Mining is currently generating about -0.13 per unit of risk. If you would invest  1,541  in SM Investments on February 5, 2025 and sell it today you would earn a total of  9.00  from holding SM Investments or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

SM Investments  vs.  RTG Mining

SM Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SM Investments is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

RTG Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days RTG Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SM Investments and RTG Mining

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

The idea behind SM Investments and RTG Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.