Correlation Between Samsung Electronics and JYP Entertainment

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

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

Diversification Opportunities for Samsung Electronics and JYP Entertainment

-0.64

Correlation Coefficient

Samsung Electronics  JYP Entertainment

Excellent diversification

The 3 months correlation between Samsung and JYP is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and JYP Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JYP Entertainment and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and JYP Entertainment go up and down completely randomly.

Pair Corralation between Samsung Electronics and JYP Entertainment

Assuming the 90 days trading horizon Samsung Electronics Co is expected to generate 0.62 times more return on investment than JYP Entertainment. However, Samsung Electronics Co is 1.62 times less risky than JYP Entertainment. It trades about 0.07 of its potential returns per unit of risk. JYP Entertainment is currently generating about 0.04 per unit of risk. If you would invest  5,400,000  in Samsung Electronics Co on October 12, 2024 and sell it today you would earn a total of  130,000  from holding Samsung Electronics Co or generate 2.41% return on investment over 90 days.

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

Samsung Electronics Co  vs.  JYP Entertainment

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

JYP Entertainment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment are ranked lower than 14 (%) 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 Samsung Electronics and JYP Entertainment

The main advantage of trading using opposite Samsung Electronics and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.