Correlation Between AfreecaTV and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both AfreecaTV 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 AfreecaTV and SM Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AfreecaTV Co and SM Entertainment Co, you can compare the effects of market volatilities on AfreecaTV 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 AfreecaTV with a short position of SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of AfreecaTV and SM Entertainment.
Diversification Opportunities for AfreecaTV and SM Entertainment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AfreecaTV and 041510 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AfreecaTV 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 AfreecaTV 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 AfreecaTV 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 AfreecaTV i.e., AfreecaTV and SM Entertainment go up and down completely randomly.
Pair Corralation between AfreecaTV and SM Entertainment
Assuming the 90 days trading horizon AfreecaTV Co is expected to generate 1.18 times more return on investment than SM Entertainment. However, AfreecaTV is 1.18 times more volatile than SM Entertainment Co. It trades about 0.03 of its potential returns per unit of risk. SM Entertainment Co is currently generating about 0.0 per unit of risk. If you would invest 8,756,890 in AfreecaTV Co on November 19, 2024 and sell it today you would earn a total of 1,993,110 from holding AfreecaTV Co or generate 22.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AfreecaTV Co vs. SM Entertainment Co
Performance |
| Timeline |
| AfreecaTV |
| SM Entertainment |
AfreecaTV and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AfreecaTV and SM Entertainment
The main advantage of trading using opposite AfreecaTV and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfreecaTV 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.The idea behind AfreecaTV Co and SM 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.| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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