Correlation Between 311960 and SM Entertainment

Can any of the company-specific risk be diversified away by investing in both 311960 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 311960 and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 311960 and SM Entertainment Co, you can compare the effects of market volatilities on 311960 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 311960 with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of 311960 and SM Entertainment.

Diversification Opportunities for 311960 and SM Entertainment

0.73

Correlation Coefficient

311960  SM Entertainment

Poor diversification

The 3 months correlation between 311960 and 041510 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding 311960 and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and 311960 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 311960 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 311960 i.e., 311960 and SM Entertainment go up and down completely randomly.

Pair Corralation between 311960 and SM Entertainment

Assuming the 90 days trading horizon 311960 is expected to under-perform the SM Entertainment. In addition to that, 311960 is 1.49 times more volatile than SM Entertainment Co. It trades about -0.04 of its total potential returns per unit of risk. SM Entertainment Co is currently generating about 0.02 per unit of volatility. If you would invest  7,341,239  in SM Entertainment Co on September 26, 2024 and sell it today you would earn a total of  238,761  from holding SM Entertainment Co or generate 3.25% return on investment over 90 days.

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

311960  vs.  SM Entertainment Co

311960

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 311960 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 311960 sustained solid returns over the last few months and may actually be approaching a breakup point.

SM Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 7 (%) 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 311960 and SM Entertainment

The main advantage of trading using opposite 311960 and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 311960 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 311960 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.