Correlation Between Sportsquest and SMC Entertainment

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

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

Diversification Opportunities for Sportsquest and SMC Entertainment

0.82

Correlation Coefficient

Sportsquest  SMC Entertainment

Very poor diversification

The 3 months correlation between Sportsquest and SMC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sportsquest and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and Sportsquest 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 Sportsquest 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 Sportsquest i.e., Sportsquest and SMC Entertainment go up and down completely randomly.

Pair Corralation between Sportsquest and SMC Entertainment

Given the investment horizon of 90 days Sportsquest is expected to generate 3.22 times more return on investment than SMC Entertainment. However, Sportsquest is 3.22 times more volatile than SMC Entertainment. It trades about 0.03 of its potential returns per unit of risk. SMC Entertainment is currently generating about -0.07 per unit of risk. If you would invest  0.03  in Sportsquest on September 18, 2024 and sell it today you would lose (0.01) from holding Sportsquest or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Sportsquest  vs.  SMC Entertainment

Sportsquest

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsquest are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Sportsquest unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sportsquest and SMC Entertainment

The main advantage of trading using opposite Sportsquest and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsquest 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 Sportsquest 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.