Correlation Between SMC Entertainment and Starfleet Innotech

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

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

Diversification Opportunities for SMC Entertainment and Starfleet Innotech

-0.41

Correlation Coefficient

SMC Entertainment  Starfleet Innotech

Very good diversification

The 3 months correlation between SMC and Starfleet is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SMC Entertainment and Starfleet Innotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starfleet Innotech 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 Starfleet Innotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starfleet Innotech has no effect on the direction of SMC Entertainment i.e., SMC Entertainment and Starfleet Innotech go up and down completely randomly.

Pair Corralation between SMC Entertainment and Starfleet Innotech

Given the investment horizon of 90 days SMC Entertainment is expected to generate 1.26 times more return on investment than Starfleet Innotech. However, SMC Entertainment is 1.26 times more volatile than Starfleet Innotech. It trades about 0.24 of its potential returns per unit of risk. Starfleet Innotech is currently generating about -0.1 per unit of risk. If you would invest  0.13  in SMC Entertainment on October 20, 2024 and sell it today you would earn a total of  0.09  from holding SMC Entertainment or generate 69.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

SMC Entertainment  vs.  Starfleet Innotech

SMC Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Entertainment are ranked lower than 9 (%) 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.

Starfleet Innotech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starfleet Innotech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Starfleet Innotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMC Entertainment and Starfleet Innotech

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

The idea behind SMC Entertainment and Starfleet Innotech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.