Correlation Between Papaya Growth and SMC Entertainment

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

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

Diversification Opportunities for Papaya Growth and SMC Entertainment

-0.53

Correlation Coefficient

Papaya Growth  SMC Entertainment

Excellent diversification

The 3 months correlation between Papaya and SMC is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and Papaya Growth 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 Papaya Growth Opportunity 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 Papaya Growth i.e., Papaya Growth and SMC Entertainment go up and down completely randomly.

Pair Corralation between Papaya Growth and SMC Entertainment

Given the investment horizon of 90 days Papaya Growth Opportunity is expected to generate 0.01 times more return on investment than SMC Entertainment. However, Papaya Growth Opportunity is 90.53 times less risky than SMC Entertainment. It trades about 0.14 of its potential returns per unit of risk. SMC Entertainment is currently generating about -0.03 per unit of risk. If you would invest  1,107  in Papaya Growth Opportunity on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Papaya Growth Opportunity or generate 0.9% return on investment over 90 days.

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

Papaya Growth Opportunity  vs.  SMC Entertainment

Papaya Growth Opportunity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Papaya Growth and SMC Entertainment

The main advantage of trading using opposite Papaya Growth and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.