Correlation Between Next Entertainment and DC Media
Can any of the company-specific risk be diversified away by investing in both Next Entertainment and DC Media 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 Next Entertainment and DC Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next Entertainment World and DC Media Co, you can compare the effects of market volatilities on Next Entertainment and DC Media 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 Next Entertainment with a short position of DC Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Entertainment and DC Media.
Diversification Opportunities for Next Entertainment and DC Media
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Next and 263720 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and DC Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DC Media and Next 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 Next Entertainment World are associated (or correlated) with DC Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DC Media has no effect on the direction of Next Entertainment i.e., Next Entertainment and DC Media go up and down completely randomly.
Pair Corralation between Next Entertainment and DC Media
Assuming the 90 days trading horizon Next Entertainment is expected to generate 19.15 times less return on investment than DC Media. But when comparing it to its historical volatility, Next Entertainment World is 1.04 times less risky than DC Media. It trades about 0.01 of its potential returns per unit of risk. DC Media Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,807,000 in DC Media Co on September 1, 2024 and sell it today you would earn a total of 192,000 from holding DC Media Co or generate 10.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Next Entertainment World vs. DC Media Co
Performance |
| Timeline |
| Next Entertainment World |
| DC Media |
Next Entertainment and DC Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Next Entertainment and DC Media
The main advantage of trading using opposite Next Entertainment and DC Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Entertainment position performs unexpectedly, DC Media 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 DC Media will offset losses from the drop in DC Media's long position.| Next Entertainment vs. AfreecaTV Co | Next Entertainment vs. Seegene | Next Entertainment vs. SS TECH | Next Entertainment vs. Busan Industrial Co |
| DC Media vs. Sungmoon Electronics Co | DC Media vs. iNtRON Biotechnology | DC Media vs. LG Electronics Pfd | DC Media vs. PJ Electronics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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