Correlation Between Polaris Office and JYP Entertainment

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

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

Diversification Opportunities for Polaris Office and JYP Entertainment

0.76

Correlation Coefficient

Polaris Office  JYP Entertainment

Poor diversification

The 3 months correlation between Polaris and JYP is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp and JYP Entertainment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JYP Entertainment Corp and Polaris Office 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 Polaris Office Corp are associated (or correlated) with JYP Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JYP Entertainment Corp has no effect on the direction of Polaris Office i.e., Polaris Office and JYP Entertainment go up and down completely randomly.

Pair Corralation between Polaris Office and JYP Entertainment

Assuming the 90 days trading horizon Polaris Office Corp is expected to generate 1.75 times more return on investment than JYP Entertainment. However, Polaris Office is 1.75 times more volatile than JYP Entertainment Corp. It trades about 0.11 of its potential returns per unit of risk. JYP Entertainment Corp is currently generating about 0.15 per unit of risk. If you would invest  513,000  in Polaris Office Corp on October 6, 2024 and sell it today you would earn a total of  106,000  from holding Polaris Office Corp or generate 20.66% return on investment over 90 days.

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

Polaris Office Corp  vs.  JYP Entertainment Corp

Polaris Office Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Office Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Polaris Office sustained solid returns over the last few months and may actually be approaching a breakup point.

JYP Entertainment Corp

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Polaris Office and JYP Entertainment

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

The idea behind Polaris Office Corp and JYP Entertainment Corp 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.

Check out your portfolio center.

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.