Correlation Between JYP Entertainment and Korean Reinsurance

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

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

Diversification Opportunities for JYP Entertainment and Korean Reinsurance

0.43

Correlation Coefficient

JYP Entertainment  Korean Reinsurance

Very weak diversification

The 3 months correlation between JYP and Korean is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment Corp and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and JYP Entertainment 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 JYP Entertainment Corp are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Korean Reinsurance go up and down completely randomly.

Pair Corralation between JYP Entertainment and Korean Reinsurance

Assuming the 90 days trading horizon JYP Entertainment Corp is expected to under-perform the Korean Reinsurance. In addition to that, JYP Entertainment is 2.57 times more volatile than Korean Reinsurance Co. It trades about -0.04 of its total potential returns per unit of risk. Korean Reinsurance Co is currently generating about -0.02 per unit of volatility. If you would invest  823,000  in Korean Reinsurance Co on December 24, 2024 and sell it today you would lose (12,000) from holding Korean Reinsurance Co or give up 1.46% of portfolio value over 90 days.

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

JYP Entertainment Corp  vs.  Korean Reinsurance Co

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.

Korean Reinsurance

Risk-Adjusted Performance

Weak

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

Pair Trading with JYP Entertainment and Korean Reinsurance

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

The idea behind JYP Entertainment Corp and Korean Reinsurance Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.