Correlation Between Next Entertainment and SAMG Entertainment

Can any of the company-specific risk be diversified away by investing in both Next Entertainment and SAMG 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 Next Entertainment and SAMG Entertainment 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 SAMG Entertainment Co, you can compare the effects of market volatilities on Next Entertainment and SAMG 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 Next Entertainment with a short position of SAMG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Entertainment and SAMG Entertainment.

Diversification Opportunities for Next Entertainment and SAMG Entertainment

-0.5

Correlation Coefficient

Next Entertainment  SAMG Entertainment

Very good diversification

The 3 months correlation between Next and SAMG is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and SAMG Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAMG Entertainment 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 SAMG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAMG Entertainment has no effect on the direction of Next Entertainment i.e., Next Entertainment and SAMG Entertainment go up and down completely randomly.

Pair Corralation between Next Entertainment and SAMG Entertainment

Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the SAMG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Next Entertainment World is 1.99 times less risky than SAMG Entertainment. The stock trades about -0.03 of its potential returns per unit of risk. The SAMG Entertainment Co is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,273,000  in SAMG Entertainment Co on December 30, 2024 and sell it today you would earn a total of  1,632,000  from holding SAMG Entertainment Co or generate 128.2% return on investment over 90 days.

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

Next Entertainment World  vs.  SAMG Entertainment Co

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.

SAMG Entertainment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SAMG Entertainment Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SAMG Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Entertainment and SAMG Entertainment

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

The idea behind Next Entertainment World and SAMG 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.