Correlation Between Hankuk Steel and JYP Entertainment

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

Diversification Opportunities for Hankuk Steel and JYP Entertainment

0.68

Correlation Coefficient

Hankuk Steel  JYP Entertainment

Poor diversification

The 3 months correlation between Hankuk and JYP is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire 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 Hankuk 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 Hankuk Steel Wire 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 Hankuk Steel i.e., Hankuk Steel and JYP Entertainment go up and down completely randomly.

Pair Corralation between Hankuk Steel and JYP Entertainment

Assuming the 90 days trading horizon Hankuk Steel is expected to generate 1.34 times less return on investment than JYP Entertainment. But when comparing it to its historical volatility, Hankuk Steel Wire is 1.32 times less risky than JYP Entertainment. It trades about 0.02 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,167,942  in JYP Entertainment Corp on October 24, 2024 and sell it today you would earn a total of  262,058  from holding JYP Entertainment Corp or generate 3.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Hankuk Steel Wire  vs.  JYP Entertainment Corp

Hankuk Steel Wire

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hankuk Steel Wire are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankuk Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

JYP Entertainment Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp are ranked lower than 15 (%) 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 Hankuk Steel and JYP Entertainment

The main advantage of trading using opposite Hankuk Steel and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk 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 Hankuk Steel Wire 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.