Correlation Between Korea Alcohol and JYP Entertainment

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

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

Diversification Opportunities for Korea Alcohol and JYP Entertainment

-0.53

Correlation Coefficient

Korea Alcohol  JYP Entertainment

Excellent diversification

The 3 months correlation between Korea and JYP is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Korea Alcohol Industrial and JYP Entertainment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JYP Entertainment Corp and Korea Alcohol 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 Korea Alcohol Industrial 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 Corp has no effect on the direction of Korea Alcohol i.e., Korea Alcohol and JYP Entertainment go up and down completely randomly.

Pair Corralation between Korea Alcohol and JYP Entertainment

Assuming the 90 days trading horizon Korea Alcohol is expected to generate 31.52 times less return on investment than JYP Entertainment. But when comparing it to its historical volatility, Korea Alcohol Industrial is 2.21 times less risky than JYP Entertainment. It trades about 0.01 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,090,000  in JYP Entertainment Corp on October 25, 2024 and sell it today you would earn a total of  2,340,000  from holding JYP Entertainment Corp or generate 45.97% return on investment over 90 days.

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

Korea Alcohol Industrial  vs.  JYP Entertainment Corp

Korea Alcohol Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Alcohol Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Alcohol is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JYP Entertainment Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp are ranked lower than 16 (%) 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 Korea Alcohol and JYP Entertainment

The main advantage of trading using opposite Korea Alcohol and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Alcohol 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 Korea Alcohol Industrial and JYP Entertainment Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.