Correlation Between SM Entertainment and Ubiquoss

Can any of the company-specific risk be diversified away by investing in both SM Entertainment and Ubiquoss 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 Ubiquoss 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 Ubiquoss, you can compare the effects of market volatilities on SM Entertainment and Ubiquoss 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 Ubiquoss. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Entertainment and Ubiquoss.

Diversification Opportunities for SM Entertainment and Ubiquoss

-0.31

Correlation Coefficient

SM Entertainment  Ubiquoss

Very good diversification

The 3 months correlation between 041510 and Ubiquoss is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SM Entertainment Co and Ubiquoss in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquoss 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 Ubiquoss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquoss has no effect on the direction of SM Entertainment i.e., SM Entertainment and Ubiquoss go up and down completely randomly.

Pair Corralation between SM Entertainment and Ubiquoss

Assuming the 90 days trading horizon SM Entertainment Co is expected to under-perform the Ubiquoss. In addition to that, SM Entertainment is 1.35 times more volatile than Ubiquoss. It trades about -0.15 of its total potential returns per unit of risk. Ubiquoss is currently generating about -0.07 per unit of volatility. If you would invest  849,000  in Ubiquoss on September 27, 2024 and sell it today you would lose (31,000) from holding Ubiquoss or give up 3.65% of portfolio value over 90 days.

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

SM Entertainment Co  vs.  Ubiquoss

SM Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SM Entertainment Co are ranked lower than 6 (%) 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.

Ubiquoss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubiquoss has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ubiquoss 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 Ubiquoss

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

The idea behind SM Entertainment Co and Ubiquoss 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.