Correlation Between ICD and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both ICD 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 ICD and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICD Co and SM Entertainment Co, you can compare the effects of market volatilities on ICD 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 ICD with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and SM Entertainment.
Diversification Opportunities for ICD and SM Entertainment
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ICD and 041510 is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ICD 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 ICD 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 ICD 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 ICD i.e., ICD and SM Entertainment go up and down completely randomly.
Pair Corralation between ICD and SM Entertainment
Assuming the 90 days trading horizon ICD is expected to generate 2.91 times less return on investment than SM Entertainment. But when comparing it to its historical volatility, ICD Co is 1.07 times less risky than SM Entertainment. It trades about 0.08 of its potential returns per unit of risk. SM Entertainment Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,490,000 in SM Entertainment Co on September 3, 2024 and sell it today you would earn a total of 990,000 from holding SM Entertainment Co or generate 13.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICD Co vs. SM Entertainment Co
Performance |
| Timeline |
| ICD Co |
| SM Entertainment |
ICD and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICD and SM Entertainment
The main advantage of trading using opposite ICD and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICD 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.| ICD vs. SFA Engineering | ICD vs. APS Holdings | ICD vs. Soulbrain Holdings Co | ICD vs. JUSUNG ENGINEERING Co |
| SM Entertainment vs. Korea New Network | SM Entertainment vs. ICD Co | SM Entertainment vs. DYPNF CoLtd | SM Entertainment vs. Busan Industrial 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 Stocks Directory module to find actively traded stocks across global markets.
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