Correlation Between Adaptive Plasma and SM Entertainment

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

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

Diversification Opportunities for Adaptive Plasma and SM Entertainment

0.7

Correlation Coefficient

Adaptive Plasma  SM Entertainment

Poor diversification

The 3 months correlation between Adaptive and 041510 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Adaptive Plasma Technology and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and Adaptive Plasma 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 Adaptive Plasma Technology are associated (or correlated) with SM Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Entertainment has no effect on the direction of Adaptive Plasma i.e., Adaptive Plasma and SM Entertainment go up and down completely randomly.

Pair Corralation between Adaptive Plasma and SM Entertainment

Assuming the 90 days trading horizon Adaptive Plasma Technology is expected to generate 1.45 times more return on investment than SM Entertainment. However, Adaptive Plasma is 1.45 times more volatile than SM Entertainment Co. It trades about 0.19 of its potential returns per unit of risk. SM Entertainment Co is currently generating about 0.12 per unit of risk. If you would invest  638,000  in Adaptive Plasma Technology on November 29, 2024 and sell it today you would earn a total of  308,000  from holding Adaptive Plasma Technology or generate 48.28% return on investment over 90 days.

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

Adaptive Plasma Technology  vs.  SM Entertainment Co

Adaptive Plasma Tech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adaptive Plasma Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adaptive Plasma sustained solid returns over the last few months and may actually be approaching a breakup point.

SM Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 9 (%) 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.

Pair Trading with Adaptive Plasma and SM Entertainment

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

The idea behind Adaptive Plasma Technology and SM Entertainment Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..