Correlation Between SMC Entertainment and First Trust

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

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

Diversification Opportunities for SMC Entertainment and First Trust

-0.05

Correlation Coefficient

SMC Entertainment  First Trust

Good diversification

The 3 months correlation between SMC and First is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SMC Entertainment and First Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust High and SMC 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 SMC Entertainment are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust High has no effect on the direction of SMC Entertainment i.e., SMC Entertainment and First Trust go up and down completely randomly.

Pair Corralation between SMC Entertainment and First Trust

Given the investment horizon of 90 days SMC Entertainment is expected to generate 17.19 times more return on investment than First Trust. However, SMC Entertainment is 17.19 times more volatile than First Trust High. It trades about 0.03 of its potential returns per unit of risk. First Trust High is currently generating about 0.02 per unit of risk. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

SMC Entertainment  vs.  First Trust High

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.

First Trust High

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SMC Entertainment and First Trust

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

The idea behind SMC Entertainment and First Trust High 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.