Correlation Between KEPCO Engineering and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both KEPCO Engineering 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 KEPCO Engineering and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEPCO Engineering Construction and SM Entertainment Co, you can compare the effects of market volatilities on KEPCO Engineering 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 KEPCO Engineering with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEPCO Engineering and SM Entertainment.
Diversification Opportunities for KEPCO Engineering and SM Entertainment
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KEPCO and 041510 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment and KEPCO Engineering 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 KEPCO Engineering Construction 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 KEPCO Engineering i.e., KEPCO Engineering and SM Entertainment go up and down completely randomly.
Pair Corralation between KEPCO Engineering and SM Entertainment
Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to under-perform the SM Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, KEPCO Engineering Construction is 1.13 times less risky than SM Entertainment. The stock trades about -0.01 of its potential returns per unit of risk. The SM Entertainment Co is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 8,350,000 in SM Entertainment Co on November 27, 2024 and sell it today you would earn a total of 1,670,000 from holding SM Entertainment Co or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KEPCO Engineering Construction vs. SM Entertainment Co
Performance |
| Timeline |
| KEPCO Engineering |
| SM Entertainment |
KEPCO Engineering and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KEPCO Engineering and SM Entertainment
The main advantage of trading using opposite KEPCO Engineering and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEPCO Engineering 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.| KEPCO Engineering vs. Jb Financial | KEPCO Engineering vs. Samsung Life Insurance | KEPCO Engineering vs. Digital Imaging Technology | KEPCO Engineering vs. Silicon2 Co |
| SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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