Correlation Between Samwon Steel and JYP Entertainment

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

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

Diversification Opportunities for Samwon Steel and JYP Entertainment

0.05

Correlation Coefficient

Samwon Steel  JYP Entertainment

Significant diversification

The 3 months correlation between Samwon and JYP is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Samwon Steel 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 Samwon Steel 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 Samwon Steel 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 Samwon Steel i.e., Samwon Steel and JYP Entertainment go up and down completely randomly.

Pair Corralation between Samwon Steel and JYP Entertainment

Assuming the 90 days trading horizon Samwon Steel is expected to generate 0.39 times more return on investment than JYP Entertainment. However, Samwon Steel is 2.55 times less risky than JYP Entertainment. It trades about 0.03 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about -0.05 per unit of risk. If you would invest  232,000  in Samwon Steel on December 26, 2024 and sell it today you would earn a total of  4,500  from holding Samwon Steel or generate 1.94% return on investment over 90 days.

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

Samwon Steel  vs.  JYP Entertainment Corp

Samwon Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samwon Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samwon Steel 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

Very Weak

Over the last 90 days JYP Entertainment Corp 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.

Pair Trading with Samwon Steel and JYP Entertainment

The main advantage of trading using opposite Samwon Steel and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samwon Steel 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 Samwon Steel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.