Correlation Between SM Investments and Premiere Entertainment

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

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

Diversification Opportunities for SM Investments and Premiere Entertainment

0.56

Correlation Coefficient

SM Investments  Premiere Entertainment

Very weak diversification

The 3 months correlation between SM Investments and Premiere is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments Corp and Premiere Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premiere Entertainment and SM Investments 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 SM Investments Corp are associated (or correlated) with Premiere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premiere Entertainment has no effect on the direction of SM Investments i.e., SM Investments and Premiere Entertainment go up and down completely randomly.

Pair Corralation between SM Investments and Premiere Entertainment

Assuming the 90 days trading horizon SM Investments Corp is expected to generate 0.42 times more return on investment than Premiere Entertainment. However, SM Investments Corp is 2.36 times less risky than Premiere Entertainment. It trades about 0.0 of its potential returns per unit of risk. Premiere Entertainment is currently generating about -0.03 per unit of risk. If you would invest  91,419  in SM Investments Corp on October 10, 2024 and sell it today you would lose (2,119) from holding SM Investments Corp or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

SM Investments Corp  vs.  Premiere Entertainment

SM Investments Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Investments Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Premiere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premiere Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SM Investments and Premiere Entertainment

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

The idea behind SM Investments Corp and Premiere 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.