Correlation Between SM Entertainment and PLAYWITH
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and PLAYWITH 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 PLAYWITH 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 PLAYWITH, you can compare the effects of market volatilities on SM Entertainment and PLAYWITH 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 PLAYWITH. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and PLAYWITH.
Diversification Opportunities for SM Entertainment and PLAYWITH
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 041510 and PLAYWITH is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and PLAYWITH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYWITH 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 PLAYWITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYWITH has no effect on the direction of SM Entertainment i.e., SM Entertainment and PLAYWITH go up and down completely randomly.
Pair Corralation between SM Entertainment and PLAYWITH
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 0.75 times more return on investment than PLAYWITH. However, SM Entertainment Co is 1.33 times less risky than PLAYWITH. It trades about 0.01 of its potential returns per unit of risk. PLAYWITH is currently generating about -0.08 per unit of risk. If you would invest 7,930,000 in SM Entertainment Co on September 27, 2024 and sell it today you would lose (230,000) from holding SM Entertainment Co or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.38% |
| Values | Daily Returns |
SM Entertainment Co vs. PLAYWITH
Performance |
| Timeline |
| SM Entertainment |
| PLAYWITH |
SM Entertainment and PLAYWITH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and PLAYWITH
The main advantage of trading using opposite SM Entertainment and PLAYWITH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, PLAYWITH 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 PLAYWITH will offset losses from the drop in PLAYWITH's long position.| SM Entertainment vs. Samsung Electronics Co | SM Entertainment vs. Samsung Electronics Co | SM Entertainment vs. KB Financial Group | SM Entertainment vs. Shinhan Financial Group |
| PLAYWITH vs. Nam Hwa Construction | PLAYWITH vs. Lotte Data Communication | PLAYWITH vs. Polaris Office Corp | PLAYWITH vs. Seohee Construction 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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