Correlation Between Sack Lunch and SMC Entertainment

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

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

Diversification Opportunities for Sack Lunch and SMC Entertainment

0.37

Correlation Coefficient

Sack Lunch  SMC Entertainment

Weak diversification

The 3 months correlation between Sack and SMC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sack Lunch Productions and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and Sack Lunch 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 Sack Lunch Productions 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 Sack Lunch i.e., Sack Lunch and SMC Entertainment go up and down completely randomly.

Pair Corralation between Sack Lunch and SMC Entertainment

Given the investment horizon of 90 days Sack Lunch is expected to generate 2.67 times less return on investment than SMC Entertainment. But when comparing it to its historical volatility, Sack Lunch Productions is 1.0 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 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.12  in SMC Entertainment on August 30, 2024 and sell it today you would earn a total of  0.00  from holding SMC Entertainment or generate 0.0% return on investment over 90 days.

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

Sack Lunch Productions  vs.  SMC Entertainment

Sack Lunch Productions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sack Lunch Productions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sack Lunch and SMC Entertainment

The main advantage of trading using opposite Sack Lunch and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sack Lunch 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 Sack Lunch Productions 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.