Correlation Between Homecast CoLtd and JYP Entertainment

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

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

Diversification Opportunities for Homecast CoLtd and JYP Entertainment

-0.73

Correlation Coefficient

Homecast CoLtd  JYP Entertainment

Pay attention - limited upside

The 3 months correlation between Homecast and JYP is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd i.e., Homecast CoLtd and JYP Entertainment go up and down completely randomly.

Pair Corralation between Homecast CoLtd and JYP Entertainment

Assuming the 90 days trading horizon Homecast CoLtd is expected to under-perform the JYP Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Homecast CoLtd is 1.11 times less risky than JYP Entertainment. The stock trades about -0.13 of its potential returns per unit of risk. The JYP Entertainment Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,010,000  in JYP Entertainment Corp on October 6, 2024 and sell it today you would earn a total of  1,770,000  from holding JYP Entertainment Corp or generate 35.33% return on investment over 90 days.

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

Homecast CoLtd  vs.  JYP Entertainment Corp

Homecast CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homecast CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Homecast CoLtd and JYP Entertainment

The main advantage of trading using opposite Homecast CoLtd and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homecast CoLtd 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 Homecast CoLtd 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .