Correlation Between SM Entertainment and Korean Drug
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Korean Drug 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 Korean Drug 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 Korean Drug Co, you can compare the effects of market volatilities on SM Entertainment and Korean Drug 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 Korean Drug. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Korean Drug.
Diversification Opportunities for SM Entertainment and Korean Drug
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 041510 and Korean is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug 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 Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of SM Entertainment i.e., SM Entertainment and Korean Drug go up and down completely randomly.
Pair Corralation between SM Entertainment and Korean Drug
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 1.82 times more return on investment than Korean Drug. However, SM Entertainment is 1.82 times more volatile than Korean Drug Co. It trades about 0.02 of its potential returns per unit of risk. Korean Drug Co is currently generating about -0.05 per unit of risk. If you would invest 7,716,045 in SM Entertainment Co on September 2, 2024 and sell it today you would earn a total of 763,955 from holding SM Entertainment Co or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. Korean Drug Co
Performance |
| Timeline |
| SM Entertainment |
| Korean Drug |
SM Entertainment and Korean Drug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and Korean Drug
The main advantage of trading using opposite SM Entertainment and Korean Drug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Korean Drug 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 Korean Drug will offset losses from the drop in Korean Drug's long position.| SM Entertainment vs. AfreecaTV Co | SM Entertainment vs. Seegene | SM Entertainment vs. SS TECH | SM Entertainment vs. Busan Industrial Co |
| Korean Drug vs. Nable Communications | Korean Drug vs. Daishin Information Communications | Korean Drug vs. Seoul Electronics Telecom | Korean Drug vs. Samick Musical Instruments |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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