Correlation Between Kia Corp and JYP Entertainment

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

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

Diversification Opportunities for Kia Corp and JYP Entertainment

-0.45

Correlation Coefficient

Kia Corp  JYP Entertainment

Very good diversification

The 3 months correlation between Kia and JYP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kia Corp and JYP Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JYP Entertainment and Kia Corp 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 Kia Corp are associated (or correlated) with JYP Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JYP Entertainment has no effect on the direction of Kia Corp i.e., Kia Corp and JYP Entertainment go up and down completely randomly.

Pair Corralation between Kia Corp and JYP Entertainment

Assuming the 90 days trading horizon Kia Corp is expected to generate 159.15 times less return on investment than JYP Entertainment. But when comparing it to its historical volatility, Kia Corp is 1.41 times less risky than JYP Entertainment. It trades about 0.0 of its potential returns per unit of risk. JYP Entertainment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,647,137  in JYP Entertainment on December 1, 2024 and sell it today you would earn a total of  782,863  from holding JYP Entertainment or generate 10.24% return on investment over 90 days.

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

Kia Corp  vs.  JYP Entertainment

Kia Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kia Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kia Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JYP Entertainment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JYP Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kia Corp and JYP Entertainment

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

The idea behind Kia Corp and JYP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.