Correlation Between JYP Entertainment and CJ ENM

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

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

Diversification Opportunities for JYP Entertainment and CJ ENM

0.43

Correlation Coefficient

JYP Entertainment  CJ ENM

Very weak diversification

The 3 months correlation between JYP and 035760 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment and CJ ENM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ ENM 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 CJ ENM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ ENM has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and CJ ENM go up and down completely randomly.

Pair Corralation between JYP Entertainment and CJ ENM

Assuming the 90 days trading horizon JYP Entertainment is expected to under-perform the CJ ENM. In addition to that, JYP Entertainment is 1.39 times more volatile than CJ ENM. It trades about -0.06 of its total potential returns per unit of risk. CJ ENM is currently generating about 0.07 per unit of volatility. If you would invest  5,370,000  in CJ ENM on December 30, 2024 and sell it today you would earn a total of  380,000  from holding CJ ENM or generate 7.08% return on investment over 90 days.

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

JYP Entertainment  vs.  CJ ENM

JYP Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days JYP Entertainment 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.

CJ ENM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CJ ENM are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CJ ENM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with JYP Entertainment and CJ ENM

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

The idea behind JYP Entertainment and CJ ENM 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.