Correlation Between Daewon Media and Next Entertainment

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

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

Diversification Opportunities for Daewon Media and Next Entertainment

-0.24

Correlation Coefficient

Daewon Media  Next Entertainment

Very good diversification

The 3 months correlation between Daewon and Next is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Media Co and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World and Daewon Media 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 Daewon Media Co are associated (or correlated) with Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of Daewon Media i.e., Daewon Media and Next Entertainment go up and down completely randomly.

Pair Corralation between Daewon Media and Next Entertainment

Assuming the 90 days trading horizon Daewon Media is expected to generate 2.09 times less return on investment than Next Entertainment. But when comparing it to its historical volatility, Daewon Media Co is 3.13 times less risky than Next Entertainment. It trades about 0.19 of its potential returns per unit of risk. Next Entertainment World is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  205,500  in Next Entertainment World on December 3, 2024 and sell it today you would earn a total of  19,000  from holding Next Entertainment World or generate 9.25% return on investment over 90 days.

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

Daewon Media Co  vs.  Next Entertainment World

Daewon Media

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daewon Media Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewon Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Next Entertainment World

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Daewon Media and Next Entertainment

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

The idea behind Daewon Media Co and Next Entertainment World 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..