Correlation Between JYP Entertainment and RedcapTour

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

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

Diversification Opportunities for JYP Entertainment and RedcapTour

0.8

Correlation Coefficient

JYP Entertainment  RedcapTour

Very poor diversification

The 3 months correlation between JYP and RedcapTour is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment and RedcapTour Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedcapTour 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 RedcapTour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedcapTour has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and RedcapTour go up and down completely randomly.

Pair Corralation between JYP Entertainment and RedcapTour

Assuming the 90 days trading horizon JYP Entertainment is expected to generate 1.9 times more return on investment than RedcapTour. However, JYP Entertainment is 1.9 times more volatile than RedcapTour Co. It trades about 0.18 of its potential returns per unit of risk. RedcapTour Co is currently generating about 0.08 per unit of risk. If you would invest  5,167,521  in JYP Entertainment on October 15, 2024 and sell it today you would earn a total of  1,992,479  from holding JYP Entertainment or generate 38.56% return on investment over 90 days.

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

JYP Entertainment  vs.  RedcapTour Co

JYP Entertainment

Risk-Adjusted Performance

14 of 100

Good

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

RedcapTour

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RedcapTour Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RedcapTour may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JYP Entertainment and RedcapTour

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

The idea behind JYP Entertainment and RedcapTour 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.