Correlation Between Daewon Media and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both Daewon Media and SM 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 Daewon Media and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewon Media Co and SM Entertainment Co, you can compare the effects of market volatilities on Daewon Media and SM 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 Daewon Media with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewon Media and SM Entertainment.
Diversification Opportunities for Daewon Media and SM Entertainment
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Daewon and 041510 is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Media Co and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and Daewon Media 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 Daewon Media Co are associated (or correlated) with SM Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Entertainment has no effect on the direction of Daewon Media i.e., Daewon Media and SM Entertainment go up and down completely randomly.
Pair Corralation between Daewon Media and SM Entertainment
Assuming the 90 days trading horizon Daewon Media Co is expected to under-perform the SM Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Daewon Media Co is 2.6 times less risky than SM Entertainment. The stock trades about -0.25 of its potential returns per unit of risk. The SM Entertainment Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewon Media Co vs. SM Entertainment Co
Performance |
| Timeline |
| Daewon Media |
| SM Entertainment |
Daewon Media and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewon Media and SM Entertainment
The main advantage of trading using opposite Daewon Media and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewon Media position performs unexpectedly, SM 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 SM Entertainment will offset losses from the drop in SM Entertainment's long position.| Daewon Media vs. Hankuk Steel Wire | Daewon Media vs. Korea Air Svc | Daewon Media vs. Seah Steel Corp | Daewon Media vs. Sam Yang Foods |
| SM Entertainment vs. AfreecaTV Co | SM Entertainment vs. SS TECH | SM Entertainment vs. Busan Industrial Co | SM Entertainment vs. Busan Ind |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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