Correlation Between SMC Entertainment and GCM Grosvenor

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

By analyzing existing cross correlation between SMC Entertainment and GCM Grosvenor, you can compare the effects of market volatilities on SMC Entertainment and GCM Grosvenor 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 GCM Grosvenor. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Entertainment and GCM Grosvenor.

Diversification Opportunities for SMC Entertainment and GCM Grosvenor

-0.68

Correlation Coefficient

SMC Entertainment  GCM Grosvenor

Excellent diversification

The 3 months correlation between SMC and GCM is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SMC Entertainment and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of SMC Entertainment i.e., SMC Entertainment and GCM Grosvenor go up and down completely randomly.

Pair Corralation between SMC Entertainment and GCM Grosvenor

Given the investment horizon of 90 days SMC Entertainment is expected to generate 6.27 times more return on investment than GCM Grosvenor. However, SMC Entertainment is 6.27 times more volatile than GCM Grosvenor. It trades about 0.03 of its potential returns per unit of risk. GCM Grosvenor is currently generating about 0.09 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	Weak
Accuracy	100.0%
Values	Daily Returns

SMC Entertainment  vs.  GCM Grosvenor

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.

GCM Grosvenor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, GCM Grosvenor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SMC Entertainment and GCM Grosvenor

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

The idea behind SMC Entertainment and GCM Grosvenor 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.