Correlation Between SM Entertainment and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Next 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 Next 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 Next Entertainment World, you can compare the effects of market volatilities on SM Entertainment and Next 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Next Entertainment.
Diversification Opportunities for SM Entertainment and Next Entertainment
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 041510 and Next is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of SM Entertainment i.e., SM Entertainment and Next Entertainment go up and down completely randomly.
Pair Corralation between SM Entertainment and Next Entertainment
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 0.97 times more return on investment than Next Entertainment. However, SM Entertainment Co is 1.03 times less risky than Next Entertainment. It trades about 0.22 of its potential returns per unit of risk. Next Entertainment World is currently generating about -0.05 per unit of risk. If you would invest 6,980,000 in SM Entertainment Co on August 25, 2024 and sell it today you would earn a total of 1,040,000 from holding SM Entertainment Co or generate 14.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Entertainment Co vs. Next Entertainment World
Performance |
| Timeline |
| SM Entertainment |
| Next Entertainment World |
SM Entertainment and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and Next Entertainment
The main advantage of trading using opposite SM Entertainment and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Next 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.| SM Entertainment vs. AfreecaTV Co | SM Entertainment vs. SS TECH | SM Entertainment vs. Busan Industrial Co | SM Entertainment vs. Busan Ind |
| Next Entertainment vs. Daou Data Corp | Next Entertainment vs. Wireless Power Amplifier | Next Entertainment vs. Tway Air Co | Next Entertainment vs. Korean Air Lines |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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