Correlation Between JYP Entertainment and Company K

Can any of the company-specific risk be diversified away by investing in both JYP Entertainment and Company K 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 Company K 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 Company K Partners, you can compare the effects of market volatilities on JYP Entertainment and Company K 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 Company K. Check out your portfolio center. Please also check ongoing floating volatility patterns of JYP Entertainment and Company K.

Diversification Opportunities for JYP Entertainment and Company K

-0.37

Correlation Coefficient

JYP Entertainment  Company K

Very good diversification

The 3 months correlation between JYP and Company is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment Corp and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners 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 Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Company K go up and down completely randomly.

Pair Corralation between JYP Entertainment and Company K

Assuming the 90 days trading horizon JYP Entertainment Corp is expected to generate 0.64 times more return on investment than Company K. However, JYP Entertainment Corp is 1.57 times less risky than Company K. It trades about 0.02 of its potential returns per unit of risk. Company K Partners is currently generating about 0.01 per unit of risk. If you would invest  6,352,725  in JYP Entertainment Corp on October 4, 2024 and sell it today you would earn a total of  637,275  from holding JYP Entertainment Corp or generate 10.03% return on investment over 90 days.

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

JYP Entertainment Corp  vs.  Company K Partners

JYP Entertainment Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp 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.

Company K Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Company K Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Company K 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 Company K

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

The idea behind JYP Entertainment Corp and Company K Partners 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.