Correlation Between SM Entertainment and Hannong Chemicals
Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Hannong Chemicals 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 Hannong Chemicals 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 Hannong Chemicals, you can compare the effects of market volatilities on SM Entertainment and Hannong Chemicals 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 Hannong Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Hannong Chemicals.
Diversification Opportunities for SM Entertainment and Hannong Chemicals
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 041510 and Hannong is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Hannong Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannong Chemicals 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 Hannong Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannong Chemicals has no effect on the direction of SM Entertainment i.e., SM Entertainment and Hannong Chemicals go up and down completely randomly.
Pair Corralation between SM Entertainment and Hannong Chemicals
Assuming the 90 days trading horizon SM Entertainment Co is expected to under-perform the Hannong Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, SM Entertainment Co is 1.55 times less risky than Hannong Chemicals. The stock trades about -0.01 of its potential returns per unit of risk. The Hannong Chemicals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,978,573 in Hannong Chemicals on September 25, 2024 and sell it today you would lose (598,573) from holding Hannong Chemicals or give up 30.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SM Entertainment Co vs. Hannong Chemicals
Performance |
Timeline |
SM Entertainment |
Hannong Chemicals |
SM Entertainment and Hannong Chemicals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SM Entertainment and Hannong Chemicals
The main advantage of trading using opposite SM Entertainment and Hannong Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Entertainment position performs unexpectedly, Hannong Chemicals 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 Hannong Chemicals will offset losses from the drop in Hannong Chemicals' long position.SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM Entertainment vs. FNC Entertainment Co |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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