Correlation Between MediaZen and SM Entertainment

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

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

Diversification Opportunities for MediaZen and SM Entertainment

0.62

Correlation Coefficient

MediaZen  SM Entertainment

Poor diversification

The 3 months correlation between MediaZen and 041510 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MediaZen and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and MediaZen 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 MediaZen 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 MediaZen i.e., MediaZen and SM Entertainment go up and down completely randomly.

Pair Corralation between MediaZen and SM Entertainment

Assuming the 90 days trading horizon MediaZen is expected to generate 69.83 times less return on investment than SM Entertainment. But when comparing it to its historical volatility, MediaZen is 1.49 times less risky than SM Entertainment. It trades about 0.0 of its potential returns per unit of risk. SM Entertainment Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,320,000  in SM Entertainment Co on August 31, 2024 and sell it today you would earn a total of  2,040,000  from holding SM Entertainment Co or generate 32.28% return on investment over 90 days.

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

MediaZen  vs.  SM Entertainment Co

MediaZen

Risk-Adjusted Performance

0 of 100

Very Weak

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

SM Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 14 (%) 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 MediaZen and SM Entertainment

The main advantage of trading using opposite MediaZen and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaZen 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 MediaZen 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.