Correlation Between Princeton Capital and SMC Entertainment

Can any of the company-specific risk be diversified away by investing in both Princeton 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 Princeton 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 Princeton Capital and SMC Entertainment, you can compare the effects of market volatilities on Princeton 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 Princeton Capital with a short position of SMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Princeton Capital and SMC Entertainment.

Diversification Opportunities for Princeton Capital and SMC Entertainment

0.16

Correlation Coefficient

Princeton Capital  SMC Entertainment

Average diversification

The 3 months correlation between Princeton and SMC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Capital and SMC Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Entertainment and Princeton 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 Princeton Capital 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 Princeton Capital i.e., Princeton Capital and SMC Entertainment go up and down completely randomly.

Pair Corralation between Princeton Capital and SMC Entertainment

Given the investment horizon of 90 days Princeton Capital is expected to under-perform the SMC Entertainment. But the pink sheet apears to be less risky and, when comparing its historical volatility, Princeton Capital is 1.72 times less risky than SMC Entertainment. The pink sheet trades about -0.21 of its potential returns per unit of risk. The SMC Entertainment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.22  in SMC Entertainment on July 5, 2024 and sell it today you would lose (0.03) from holding SMC Entertainment or give up 13.64% of portfolio value over 90 days.

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

Princeton Capital  vs.  SMC Entertainment

Princeton Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Princeton Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 fragile performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Princeton Capital and SMC Entertainment

The main advantage of trading using opposite Princeton Capital and SMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Princeton 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 Princeton Capital 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.