Correlation Between SM Entertainment and Choil Aluminum
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Choil Aluminum 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 Choil Aluminum 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 Choil Aluminum, you can compare the effects of market volatilities on SM Entertainment and Choil Aluminum 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 Choil Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Choil Aluminum.
Diversification Opportunities for SM Entertainment and Choil Aluminum
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 041510 and Choil is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum 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 Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of SM Entertainment i.e., SM Entertainment and Choil Aluminum go up and down completely randomly.
Pair Corralation between SM Entertainment and Choil Aluminum
Assuming the 90 days trading horizon SM Entertainment Co is expected to under-perform the Choil Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, SM Entertainment Co is 1.19 times less risky than Choil Aluminum. The stock trades about -0.1 of its potential returns per unit of risk. The Choil Aluminum is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 153,200 in Choil Aluminum on September 24, 2024 and sell it today you would lose (9,500) from holding Choil Aluminum or give up 6.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. Choil Aluminum
Performance |
| Timeline |
| SM Entertainment |
| Choil Aluminum |
SM Entertainment and Choil Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and Choil Aluminum
The main advantage of trading using opposite SM Entertainment and Choil Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Choil Aluminum 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 Choil Aluminum will offset losses from the drop in Choil Aluminum's long position.| SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM Entertainment vs. FNC Entertainment Co |
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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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