Correlation Between SM Entertainment and Celltrion

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

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

Diversification Opportunities for SM Entertainment and Celltrion

-0.6

Correlation Coefficient

SM Entertainment  Celltrion

Excellent diversification

The 3 months correlation between 041510 and Celltrion is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Celltrion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion and SM Entertainment 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 Entertainment Co are associated (or correlated) with Celltrion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion has no effect on the direction of SM Entertainment i.e., SM Entertainment and Celltrion go up and down completely randomly.

Pair Corralation between SM Entertainment and Celltrion

Assuming the 90 days trading horizon SM Entertainment Co is expected to under-perform the Celltrion. In addition to that, SM Entertainment is 1.28 times more volatile than Celltrion. It trades about -0.12 of its total potential returns per unit of risk. Celltrion is currently generating about 0.21 per unit of volatility. If you would invest  17,680,000  in Celltrion on September 26, 2024 and sell it today you would earn a total of  1,760,000  from holding Celltrion or generate 9.95% return on investment over 90 days.

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

SM Entertainment Co  vs.  Celltrion

SM Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SM Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Celltrion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celltrion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Celltrion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SM Entertainment and Celltrion

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

The idea behind SM Entertainment Co and Celltrion 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.