Correlation Between Next Entertainment and Samsung SDI

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

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

Diversification Opportunities for Next Entertainment and Samsung SDI

0.75

Correlation Coefficient

Next Entertainment  Samsung SDI

Poor diversification

The 3 months correlation between Next and Samsung is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and Samsung SDI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung SDI and Next 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 Next Entertainment World are associated (or correlated) with Samsung SDI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung SDI has no effect on the direction of Next Entertainment i.e., Next Entertainment and Samsung SDI go up and down completely randomly.

Pair Corralation between Next Entertainment and Samsung SDI

Assuming the 90 days trading horizon Next Entertainment World is expected to generate 1.01 times more return on investment than Samsung SDI. However, Next Entertainment is 1.01 times more volatile than Samsung SDI. It trades about -0.06 of its potential returns per unit of risk. Samsung SDI is currently generating about -0.08 per unit of risk. If you would invest  331,000  in Next Entertainment World on October 8, 2024 and sell it today you would lose (108,500) from holding Next Entertainment World or give up 32.78% of portfolio value over 90 days.

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

Next Entertainment World  vs.  Samsung SDI

Next Entertainment World

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Next Entertainment and Samsung SDI

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

The idea behind Next Entertainment World and Samsung SDI 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 Stocks Directory module to find actively traded stocks across global markets.