Correlation Between 1812 Brewing and SMC Entertainment

Can any of the company-specific risk be diversified away by investing in both 1812 Brewing and SMC 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 1812 Brewing and SMC Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1812 Brewing and SMC Entertainment, you can compare the effects of market volatilities on 1812 Brewing and SMC 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 1812 Brewing with a short position of SMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1812 Brewing and SMC Entertainment.

Diversification Opportunities for 1812 Brewing and SMC Entertainment

0.31

Correlation Coefficient

1812 Brewing  SMC Entertainment

Weak diversification

The 3 months correlation between 1812 and SMC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding 1812 Brewing and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and 1812 Brewing 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 1812 Brewing are associated (or correlated) with SMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Entertainment has no effect on the direction of 1812 Brewing i.e., 1812 Brewing and SMC Entertainment go up and down completely randomly.

Pair Corralation between 1812 Brewing and SMC Entertainment

Given the investment horizon of 90 days 1812 Brewing is expected to generate 28.63 times more return on investment than SMC Entertainment. However, 1812 Brewing is 28.63 times more volatile than SMC Entertainment. It trades about 0.3 of its potential returns per unit of risk. SMC Entertainment is currently generating about 0.11 per unit of risk. If you would invest  0.00  in 1812 Brewing on December 23, 2024 and sell it today you would earn a total of  0.00  from holding 1812 Brewing or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.94%
Values	Daily Returns

1812 Brewing  vs.  SMC Entertainment

1812 Brewing

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in 1812 Brewing are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, 1812 Brewing unveiled solid returns over the last few months and may actually be approaching a breakup point.

SMC Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Entertainment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, SMC Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1812 Brewing and SMC Entertainment

The main advantage of trading using opposite 1812 Brewing and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1812 Brewing position performs unexpectedly, SMC 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 SMC Entertainment will offset losses from the drop in SMC Entertainment's long position.

The idea behind 1812 Brewing and SMC Entertainment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.