Correlation Between JYP Entertainment and Kukdong Oil

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

By analyzing existing cross correlation between JYP Entertainment and Kukdong Oil Chemicals, you can compare the effects of market volatilities on JYP Entertainment and Kukdong Oil 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 Kukdong Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of JYP Entertainment and Kukdong Oil.

Diversification Opportunities for JYP Entertainment and Kukdong Oil

-0.77

Correlation Coefficient

JYP Entertainment  Kukdong Oil

Pay attention - limited upside

The 3 months correlation between JYP and Kukdong is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment and Kukdong Oil Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdong Oil Chemicals 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 are associated (or correlated) with Kukdong Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdong Oil Chemicals has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Kukdong Oil go up and down completely randomly.

Pair Corralation between JYP Entertainment and Kukdong Oil

Assuming the 90 days trading horizon JYP Entertainment is expected to generate 1.89 times more return on investment than Kukdong Oil. However, JYP Entertainment is 1.89 times more volatile than Kukdong Oil Chemicals. It trades about 0.17 of its potential returns per unit of risk. Kukdong Oil Chemicals is currently generating about -0.04 per unit of risk. If you would invest  5,100,000  in JYP Entertainment on September 27, 2024 and sell it today you would earn a total of  1,730,000  from holding JYP Entertainment or generate 33.92% return on investment over 90 days.

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

JYP Entertainment  vs.  Kukdong Oil Chemicals

JYP Entertainment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment are ranked lower than 13 (%) 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.

Kukdong Oil Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind JYP Entertainment and Kukdong Oil Chemicals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.