Correlation Between SM Entertainment and SK Hynix
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and SK Hynix 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 SM Entertainment and SK Hynix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Entertainment Co and SK Hynix, you can compare the effects of market volatilities on SM Entertainment and SK Hynix 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 SM Entertainment with a short position of SK Hynix. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and SK Hynix.
Diversification Opportunities for SM Entertainment and SK Hynix
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 041510 and 000660 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and SK Hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Hynix and SM 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 SM Entertainment Co are associated (or correlated) with SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Hynix has no effect on the direction of SM Entertainment i.e., SM Entertainment and SK Hynix go up and down completely randomly.
Pair Corralation between SM Entertainment and SK Hynix
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 0.8 times more return on investment than SK Hynix. However, SM Entertainment Co is 1.25 times less risky than SK Hynix. It trades about 0.15 of its potential returns per unit of risk. SK Hynix is currently generating about 0.01 per unit of risk. If you would invest 6,590,000 in SM Entertainment Co on August 28, 2024 and sell it today you would earn a total of 1,670,000 from holding SM Entertainment Co or generate 25.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. SK Hynix
Performance |
| Timeline |
| SM Entertainment |
| SK Hynix |
SM Entertainment and SK Hynix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and SK Hynix
The main advantage of trading using opposite SM Entertainment and SK Hynix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, SK Hynix 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 SK Hynix will offset losses from the drop in SK Hynix's long position.| SM Entertainment vs. AfreecaTV Co | SM Entertainment vs. SS TECH | SM Entertainment vs. Busan Industrial Co | SM Entertainment vs. Busan Ind |
| SK Hynix vs. Cloud Air CoLtd | SK Hynix vs. Daou Data Corp | SK Hynix vs. Lotte Data Communication | SK Hynix vs. System and Application |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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