Correlation Between ChipsMedia and JYP Entertainment

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

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

Diversification Opportunities for ChipsMedia and JYP Entertainment

0.04

Correlation Coefficient

ChipsMedia  JYP Entertainment

Significant diversification

The 3 months correlation between ChipsMedia and JYP is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia 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 ChipsMedia 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 ChipsMedia 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 ChipsMedia i.e., ChipsMedia and JYP Entertainment go up and down completely randomly.

Pair Corralation between ChipsMedia and JYP Entertainment

Assuming the 90 days trading horizon ChipsMedia is expected to generate 1.79 times less return on investment than JYP Entertainment. In addition to that, ChipsMedia is 1.32 times more volatile than JYP Entertainment Corp. It trades about 0.07 of its total potential returns per unit of risk. JYP Entertainment Corp is currently generating about 0.16 per unit of volatility. If you would invest  5,180,000  in JYP Entertainment Corp on October 8, 2024 and sell it today you would earn a total of  1,600,000  from holding JYP Entertainment Corp or generate 30.89% return on investment over 90 days.

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

ChipsMedia  vs.  JYP Entertainment Corp

ChipsMedia

Risk-Adjusted Performance

5 of 100

Modest

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

JYP Entertainment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment Corp are ranked lower than 12 (%) 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 ChipsMedia and JYP Entertainment

The main advantage of trading using opposite ChipsMedia and JYP Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChipsMedia 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 ChipsMedia 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.