Correlation Between Samsung Electronics and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics and SM 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 Samsung Electronics and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Electronics Co and SM Entertainment Co, you can compare the effects of market volatilities on Samsung Electronics and SM 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 Samsung Electronics with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and SM Entertainment.
Diversification Opportunities for Samsung Electronics and SM Entertainment
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Samsung and 041510 is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and Samsung Electronics 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 Samsung Electronics Co are associated (or correlated) with SM Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Entertainment has no effect on the direction of Samsung Electronics i.e., Samsung Electronics and SM Entertainment go up and down completely randomly.
Pair Corralation between Samsung Electronics and SM Entertainment
Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the SM Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.27 times less risky than SM Entertainment. The stock trades about -0.09 of its potential returns per unit of risk. The SM Entertainment Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,920,000 in SM Entertainment Co on September 1, 2024 and sell it today you would lose (440,000) from holding SM Entertainment Co or give up 4.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samsung Electronics Co vs. SM Entertainment Co
Performance |
| Timeline |
| Samsung Electronics |
| SM Entertainment |
Samsung Electronics and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and SM Entertainment
The main advantage of trading using opposite Samsung Electronics and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics position performs unexpectedly, SM 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 SM Entertainment will offset losses from the drop in SM Entertainment's long position.| Samsung Electronics vs. Seoul Electronics Telecom | Samsung Electronics vs. Ni Steel | Samsung Electronics vs. CKH Food Health | Samsung Electronics vs. Daedong Steel Co |
| SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM Entertainment vs. FNC Entertainment Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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