Correlation Between SM Entertainment and CKH Food
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and CKH Food 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 CKH Food 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 CKH Food Health, you can compare the effects of market volatilities on SM Entertainment and CKH Food 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 CKH Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and CKH Food.
Diversification Opportunities for SM Entertainment and CKH Food
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 041510 and CKH is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and CKH Food Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKH Food Health 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 CKH Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKH Food Health has no effect on the direction of SM Entertainment i.e., SM Entertainment and CKH Food go up and down completely randomly.
Pair Corralation between SM Entertainment and CKH Food
Assuming the 90 days trading horizon SM Entertainment Co is expected to generate 1.29 times more return on investment than CKH Food. However, SM Entertainment is 1.29 times more volatile than CKH Food Health. It trades about 0.47 of its potential returns per unit of risk. CKH Food Health is currently generating about -0.21 per unit of risk. If you would invest 7,040,000 in SM Entertainment Co on November 7, 2024 and sell it today you would earn a total of 1,310,000 from holding SM Entertainment Co or generate 18.61% 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. CKH Food Health
Performance |
| Timeline |
| SM Entertainment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| CKH Food Health |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SM Entertainment and CKH Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Entertainment and CKH Food
The main advantage of trading using opposite SM Entertainment and CKH Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, CKH Food 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 CKH Food will offset losses from the drop in CKH Food's long position.The idea behind SM Entertainment Co and CKH Food Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CKH Food vs. Solution Advanced Technology | CKH Food vs. Shinhan Inverse WTI | CKH Food vs. ISU Chemical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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