Correlation Between SMC Entertainment and 1812 Brewing

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

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

Diversification Opportunities for SMC Entertainment and 1812 Brewing

0.18

Correlation Coefficient

SMC Entertainment  1812 Brewing

Average diversification

The 3 months correlation between SMC and 1812 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SMC Entertainment and 1812 Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1812 Brewing 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 1812 Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1812 Brewing has no effect on the direction of SMC Entertainment i.e., SMC Entertainment and 1812 Brewing go up and down completely randomly.

Pair Corralation between SMC Entertainment and 1812 Brewing

Given the investment horizon of 90 days SMC Entertainment is expected to under-perform the 1812 Brewing. But the pink sheet apears to be less risky and, when comparing its historical volatility, SMC Entertainment is 54.17 times less risky than 1812 Brewing. The pink sheet trades about -0.1 of its potential returns per unit of risk. The 1812 Brewing is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  0.01  in 1812 Brewing on September 15, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

SMC Entertainment  vs.  1812 Brewing

SMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

1812 Brewing

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 1812 Brewing are ranked lower than 22 (%) 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.

Pair Trading with SMC Entertainment and 1812 Brewing

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

The idea behind SMC Entertainment and 1812 Brewing 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.