Correlation Between Daedong Steel and SAMG Entertainment

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Can any of the company-specific risk be diversified away by investing in both Daedong Steel and SAMG 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 Daedong Steel and SAMG Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daedong Steel Co and SAMG Entertainment Co, you can compare the effects of market volatilities on Daedong Steel and SAMG 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 Daedong Steel with a short position of SAMG Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Steel and SAMG Entertainment.

Diversification Opportunities for Daedong Steel and SAMG Entertainment

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Daedong and SAMG is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Steel Co and SAMG Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAMG Entertainment and Daedong Steel 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 Daedong Steel Co are associated (or correlated) with SAMG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAMG Entertainment has no effect on the direction of Daedong Steel i.e., Daedong Steel and SAMG Entertainment go up and down completely randomly.

Pair Corralation between Daedong Steel and SAMG Entertainment

Assuming the 90 days trading horizon Daedong Steel Co is expected to under-perform the SAMG Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Daedong Steel Co is 3.37 times less risky than SAMG Entertainment. The stock trades about -0.09 of its potential returns per unit of risk. The SAMG Entertainment Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,361,000  in SAMG Entertainment Co on October 22, 2024 and sell it today you would earn a total of  53,000  from holding SAMG Entertainment Co or generate 3.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Daedong Steel Co  vs.  SAMG Entertainment Co

 Performance 
       Timeline  
Daedong Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Daedong Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
SAMG Entertainment 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in SAMG Entertainment Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SAMG Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Daedong Steel and SAMG Entertainment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Daedong Steel and SAMG Entertainment

The main advantage of trading using opposite Daedong Steel and SAMG Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Steel position performs unexpectedly, SAMG 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 SAMG Entertainment will offset losses from the drop in SAMG Entertainment's long position.
The idea behind Daedong Steel Co and SAMG Entertainment Co 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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