Correlation Between SM Entertainment and YG Entertainment
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and YG Entertainment 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 YG Entertainment 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 YG Entertainment, you can compare the effects of market volatilities on SM Entertainment and YG Entertainment 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 YG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and YG Entertainment.
Diversification Opportunities for SM Entertainment and YG Entertainment
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 041510 and 122870 is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment 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 YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of SM Entertainment i.e., SM Entertainment and YG Entertainment go up and down completely randomly.
Pair Corralation between SM Entertainment and YG Entertainment
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 0.76 times more return on investment than YG Entertainment. However, SM Entertainment Co is 1.31 times less risky than YG Entertainment. It trades about 0.43 of its potential returns per unit of risk. YG Entertainment is currently generating about 0.28 per unit of risk. If you would invest 8,350,000 in SM Entertainment Co on November 28, 2024 and sell it today you would earn a total of 1,840,000 from holding SM Entertainment Co or generate 22.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. YG Entertainment
Performance |
| Timeline |
| SM Entertainment |
| YG Entertainment |
SM Entertainment and YG Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and YG Entertainment
The main advantage of trading using opposite SM Entertainment and YG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, YG Entertainment 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 YG Entertainment will offset losses from the drop in YG Entertainment's long position.| SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM Entertainment vs. FNC Entertainment Co |
| YG Entertainment vs. JYP Entertainment | YG Entertainment vs. SM Entertainment Co | YG Entertainment vs. Cube Entertainment | YG Entertainment vs. FNC Entertainment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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