Correlation Between Urbana and SMC Entertainment

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

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

Diversification Opportunities for Urbana and SMC Entertainment

-0.69

Correlation Coefficient

Urbana  SMC Entertainment

Excellent diversification

The 3 months correlation between Urbana and SMC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Urbana and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and Urbana 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 Urbana 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 Urbana i.e., Urbana and SMC Entertainment go up and down completely randomly.

Pair Corralation between Urbana and SMC Entertainment

Assuming the 90 days horizon Urbana is expected to generate 0.17 times more return on investment than SMC Entertainment. However, Urbana is 5.88 times less risky than SMC Entertainment. It trades about 0.13 of its potential returns per unit of risk. SMC Entertainment is currently generating about -0.03 per unit of risk. If you would invest  374.00  in Urbana on September 16, 2024 and sell it today you would earn a total of  48.00  from holding Urbana or generate 12.83% return on investment over 90 days.

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

Urbana  vs.  SMC Entertainment

Urbana

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Urbana are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Urbana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Urbana and SMC Entertainment

The main advantage of trading using opposite Urbana and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urbana 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 Urbana 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.