Correlation Between BlackRock Capital and SMC Entertainment

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

By analyzing existing cross correlation between BlackRock Capital Allocation and SMC Entertainment, you can compare the effects of market volatilities on BlackRock Capital and SMC 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 BlackRock Capital with a short position of SMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Capital and SMC Entertainment.

Diversification Opportunities for BlackRock Capital and SMC Entertainment

-0.54

Correlation Coefficient

BlackRock Capital  SMC Entertainment

Excellent diversification

The 3 months correlation between BlackRock and SMC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Capital Allocation and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and BlackRock Capital 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 BlackRock Capital Allocation are associated (or correlated) with SMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Entertainment has no effect on the direction of BlackRock Capital i.e., BlackRock Capital and SMC Entertainment go up and down completely randomly.

Pair Corralation between BlackRock Capital and SMC Entertainment

Given the investment horizon of 90 days BlackRock Capital is expected to generate 18.19 times less return on investment than SMC Entertainment. But when comparing it to its historical volatility, BlackRock Capital Allocation is 12.74 times less risky than SMC Entertainment. It trades about 0.02 of its potential returns per unit of risk. SMC Entertainment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.19  in SMC Entertainment on September 27, 2024 and sell it today you would lose (0.02) from holding SMC Entertainment or give up 10.53% of portfolio value over 90 days.

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

BlackRock Capital Allocation  vs.  SMC Entertainment

BlackRock Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Capital Allocation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SMC Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, SMC Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock Capital and SMC Entertainment

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

The idea behind BlackRock Capital Allocation and SMC Entertainment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.