Correlation Between SM Entertainment and Shinhan Inverse

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

Diversification Opportunities for SM Entertainment and Shinhan Inverse

0.37

Correlation Coefficient

SM Entertainment  Shinhan Inverse

Weak diversification

The 3 months correlation between 041510 and Shinhan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Shinhan Inverse Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse Silver 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 Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse Silver has no effect on the direction of SM Entertainment i.e., SM Entertainment and Shinhan Inverse go up and down completely randomly.

Pair Corralation between SM Entertainment and Shinhan Inverse

Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 1.82 times more return on investment than Shinhan Inverse. However, SM Entertainment is 1.82 times more volatile than Shinhan Inverse Silver. It trades about 0.02 of its potential returns per unit of risk. Shinhan Inverse Silver is currently generating about -0.01 per unit of risk. If you would invest  7,333,678  in SM Entertainment Co on October 4, 2024 and sell it today you would earn a total of  226,322  from holding SM Entertainment Co or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.34%
Values	Daily Returns

SM Entertainment Co  vs.  Shinhan Inverse Silver

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.

Shinhan Inverse Silver

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Inverse Silver are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan Inverse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SM Entertainment and Shinhan Inverse

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

The idea behind SM Entertainment Co and Shinhan Inverse Silver 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.