Correlation Between SMC Entertainment and Focus Financial

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

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

Diversification Opportunities for SMC Entertainment and Focus Financial

0.0

Correlation Coefficient

SMC Entertainment  Focus Financial

Pay attention - limited upside

The 3 months correlation between SMC and Focus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SMC Entertainment and Focus Financial Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Financial Partners and SMC 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 SMC Entertainment are associated (or correlated) with Focus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Financial Partners has no effect on the direction of SMC Entertainment i.e., SMC Entertainment and Focus Financial go up and down completely randomly.

Pair Corralation between SMC Entertainment and Focus Financial

If you would invest  0.19  in SMC Entertainment on December 5, 2024 and sell it today you would earn a total of  0.08  from holding SMC Entertainment or generate 42.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SMC Entertainment  vs.  Focus Financial Partners

SMC Entertainment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Entertainment are ranked lower than 12 (%) 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.

Focus Financial Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Financial Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Focus Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SMC Entertainment and Focus Financial

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

The idea behind SMC Entertainment and Focus Financial Partners 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.