Correlation Between SM Entertainment and Korea Computer
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Korea Computer 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 Korea Computer 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 Korea Computer, you can compare the effects of market volatilities on SM Entertainment and Korea Computer 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 Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Korea Computer.
Diversification Opportunities for SM Entertainment and Korea Computer
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between 041510 and Korea is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer 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 Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of SM Entertainment i.e., SM Entertainment and Korea Computer go up and down completely randomly.
Pair Corralation between SM Entertainment and Korea Computer
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 0.91 times more return on investment than Korea Computer. However, SM Entertainment Co is 1.1 times less risky than Korea Computer. It trades about 0.3 of its potential returns per unit of risk. Korea Computer is currently generating about 0.02 per unit of risk. If you would invest 7,080,000 in SM Entertainment Co on August 30, 2024 and sell it today you would earn a total of 1,570,000 from holding SM Entertainment Co or generate 22.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. Korea Computer
Performance |
| Timeline |
| SM Entertainment |
| Korea Computer |
SM Entertainment and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and Korea Computer
The main advantage of trading using opposite SM Entertainment and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Korea Computer 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 Korea Computer will offset losses from the drop in Korea Computer's long position.| SM Entertainment vs. Korea New Network | SM Entertainment vs. Busan Industrial Co | SM Entertainment vs. Busan Ind | SM Entertainment vs. Shinhan WTI Futures |
| Korea Computer vs. Daou Data Corp | Korea Computer vs. Busan Industrial Co | Korea Computer vs. Busan Ind | Korea Computer vs. Shinhan WTI Futures |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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