Correlation Between SM Entertainment and Hanil Chemical

Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Hanil Chemical 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 SM Entertainment and Hanil Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SM Entertainment Co and Hanil Chemical Ind, you can compare the effects of market volatilities on SM Entertainment and Hanil Chemical 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 SM Entertainment with a short position of Hanil Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Hanil Chemical.

Diversification Opportunities for SM Entertainment and Hanil Chemical

-0.81

Correlation Coefficient

SM Entertainment  Hanil Chemical

Pay attention - limited upside

The 3 months correlation between 041510 and Hanil is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind and SM 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 SM Entertainment Co are associated (or correlated) with Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of SM Entertainment i.e., SM Entertainment and Hanil Chemical go up and down completely randomly.

Pair Corralation between SM Entertainment and Hanil Chemical

Assuming the 90 days trading horizon SM Entertainment Co is expected to under-perform the Hanil Chemical. But the stock apears to be less risky and, when comparing its historical volatility, SM Entertainment Co is 1.13 times less risky than Hanil Chemical. The stock trades about -0.18 of its potential returns per unit of risk. The Hanil Chemical Ind is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  996,590  in Hanil Chemical Ind on October 1, 2024 and sell it today you would earn a total of  135,410  from holding Hanil Chemical Ind or generate 13.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

SM Entertainment Co  vs.  Hanil Chemical Ind

SM Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SM Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanil Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanil Chemical Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanil Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SM Entertainment and Hanil Chemical

The main advantage of trading using opposite SM Entertainment and Hanil Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Hanil Chemical 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 Hanil Chemical will offset losses from the drop in Hanil Chemical's long position.

The idea behind SM Entertainment Co and Hanil Chemical Ind 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.